OPTIONS - Microsoft volume soars as marts compete
By Laura Jacobs
CHICAGO, Sept 1 (Reuters) - Business in Microsoft Corp. (Nasdaq:MSFT - news) options surged Wednesday, boosted by some of the biggest equity options trades ever, as the four U.S. options marts went head-to-head in the issue for the first time.
After midday, more than 140,000 Microsoft options contracts had traded on the Chicago Board Options Exchange (CBOE) alone. In the closer months, roughly 18,700 contracts changed hands. But in options that expire more than one year out, or Long-Term Equity Anticipation Securities (LEAPS), turnover soared.
By the close, 56,100 January 2002 70 puts and 59,800 January 2001 62.5 puts had traded on the CBOE, where Susquehanna Investment Group is the Designated Primary Market maker. Neither LEAP had any open interest.
Average daily volume last year in Microsoft options at the Pacific Exchange (PCX) was roughly 38,500 contracts.
A source at Susquehanna said the huge CBOE trade of roughly 96,000 contracts total, or 48,000 on each leg of a spread, was done for a customer.
``We think that was the largest equity options trade ever done on a U.S. floor,' said the source.
The Options Clearing Corp. and the CBOE do not keep official records of the biggest-size trades, but ``as far as anybody knows' it is the largest-ever individual equity options trade, said a CBOE spokeswoman.
At the PCX, Wednesday's Microsoft options volume excluding LEAPS was roughly 69,000 contracts. The busiest Microsoft options there were September 120 puts, which showed volume of 16,950 on open interest of 47. The January 2000 90 puts showed volume of 13,237 on open interest of 7,559, and the January 2000 90 calls had volume of 13,681 on open interest of 18,966.
Volume totals were smaller at the American Stock Exchange (AMEX) and the Philadelphia Stock Exchange (PHLX), both of which also launched Microsoft options trade Wednesday.
At the AMEX, roughly 5,600 Microsoft options changed hands, excluding LEAPS. At the PHLX, about 550 contracts were traded.
Until today, Microsoft had been the exclusive flagship listing of the PCX, where it generated 9.7 million contracts, or 16.4 percent, of the PCX's total options volume last year of about 59 million contracts.
But the CBOE, the nation's biggest options market, broke with tradition August 23 and began trading in options on Dell Computer, which had been the exclusive domain of -- and most-active option on -- the PHLX.
That move sparked a scramble by the four exchanges to add each others' options.
The latest salvo in the eight-day-old options war again fueled talk that Wednesday's CBOE volume had been artificially inflated to make it look like CBOE was dominating turnover.
``The impression of liquidity is strongest at the CBOE, but if you are a sophisticated investor or trader, you understand that's just painting of the tape,' said Paul Foster, investment strategist at 101wallstreet.com. ``You can't prove it...(but) this big trade on the first day of multiple options? And if you look at stock volume, it would have to be huge.'
Technically, ``painting the tape' involves markets making risk-free trades among themselves for the sole purpose of creating volume and it would constitute a rule violation.
``If there were an actual allegation, someone would have to direct that to the Department of Market Regulation,' said a CBOE spokesman in response to an inquiry.
``I think it was a legitimate calendar spread in LEAPS,' said Michael Schwartz, chief options strategist, CIBC Oppenheimer, who said it looked like the customer was buying the January 70s against the sale of the 62.5s.
``These are deep out-of-the-money puts and if they were painting the tape (they would be using nearer-the-money options),' Schwartz added.
``This is a really, really big deal for us,' said a market maker at the PCX of the multiple-listings battle. ``I don't want to bad-mouth anybody.' |
