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Strategies & Market Trends : Piffer OT - And Other Assorted Nuts -- Ignore unavailable to you. Want to Upgrade?

To: wlheatmoon who wrote (2294)	6/18/1999 2:25:00 PM
From: John Pitera	Read Replies (2) \| Respond to of 63513

EDIT: I thought this was the Myth thread but fun article anyway. Gillette Brings Bears a Triple-Witching Gift in Options Play By Erin Arvedlund Staff Reporter 6/18/99 1:30 PM ET Sometimes investing in options feels like a near-death experience, but when you get turned back from the white light, it's like a gift from the money gods. Such was the case today in the out-of-the-money put options in Gillette (G:NYSE), which looked set to expire worthless at the end of trading this week. But a Thursday profit warning followed by a batch of downgrades on Friday for the consumer products company sent the stock into a tailspin. Volatility Index Today % Change 23.38 +3.73% Source: ILX Gillette on Thursday blamed weak international sales for a warning that second-quarter per-share earnings would fall about 10% below Wall Street expectations. The company indicated that profit for the full year also would fail to meet estimates. J.P. Morgan and Donaldson Lufkin & Jenrette downgraded the stock Friday and the stock dropped 5 to 42 5/16. Suddenly, Gillette put options turned golden, at least for the buyers. Gillette June 45 puts opened for trading Friday at a bare-minimum 1/16 ($6.25), all ready to die at day's end. By midsession, however, the same teenie put cost 2 1/2 ($250), up 2 7/16 ($243.75) on volume of 428 contracts against open interest of 5,096. Want another summertime Christmas present? Gillette's June 50 puts went deep in-the-money and gained 4 13/16 ($481.25) to 7 2/8 ($737.50) on volume of 435. Once per quarter, futures and options on stocks and stock indexes expire all on the same day -- including those pennies-from-heaven Gillette put options. Friday's trading session marks one of those days: a triple-witching closeout of options and futures on stocks and stock indexes. Given the relative paucity of open interest, it figures that the volatility often associated with quarterly expirations will be missing in the session, though the usual spike in volume should take place. Put/Call Ratio Today (Noon) Previous Close 0.32 0.38 Source: ILX "Most of the volatility took place earlier in the week," said Jay Shartsis, R.F. Lafferty & Co.'s director of options trading. Though Friday's trading "used to be a lot more exciting in year's past, in terms of craziness," Shartsis did point out that investors should pay attention to the Chicago Board Options Exchange's put/call ratio has "hit a 'sell' level." "The market will pull back after Monday, since the sentiment situation is very bearish. However, we did see that the crack in Internet stocks didn't buckle the rest of the market. The leading group got killed, but not everyone else," Shartsis said. June-dated rumors, he noted, were creeping into July, including those surrounding Alza (AZA:NYSE) being taken over by Abbott Labs (ABT:NYSE). Though June calls in Alza were selling off Friday, just as many or more buyers were rolling into July calls, betting one month further on a buyout. (Shartsis warned, however, that "the options are rather pricey" after several days of moving higher). Alza's July 45 calls gained 1 3/8 ($137.50) to 3 7/8 ($387.50) on volume of 2,404 contracts against open interest of 2,223. Its July 50 calls racked up a gain of 7/16 ($43.75) to 1 11/16 ($168.75) on volume of 2,060, far outstripping the meager open interest of 392. Abbott shares were down 1/8 to 44 1/2 while Alza was up 11/16 to 45 1/4.