To: Eric who wrote (10733 ) 12/12/1997 8:30:00 PM From: Glenn D. Rudolph Respond to
US OPTIONS FOCUS/Tech stock put demand steady
Reuters Story - December 12, 1997 17:09
%BUS %ELI %DPR %ENT %US %DRV %STX %INSI %.N/OPT IBM INTC MU CPQ DELL CDN V%REUTER P%RTR
CHICAGO, Dec 12 (Reuters) - The drive for put options on
technology stocks remained steady Friday as the sector's
selloff gained steam in issues like International Business
Machines Corp , options traders said.
"When the techs were up a little bit, people that didn't
get out are getting out," one options trader in Chicago said.
"Now it's starting to hit IBM."
In late activity, the computer maker's stock was down two
at 99-5/8 on consolidated volume of about 7.3 million shares.
The stock reached a session low of 96-3/8 before recovering.
The stock began the week at 112-1/4.
"Option volume is indicative of, if not a panic, certainly
a lot of demand for puts," said Jon Najarian, president of
Mercury Trading, the designated primary market maker for IBM
options.
Investors are saying, "Get me a put any way. Any way how,
get me a put," Najarian said.
IBM puts were the most active outside of those of another
technology bellwether, Intel Corp .
The IBM December 105 put traded 8,200 contracts and the
December 100 put traded 7,655.
In Intel, the December 70 put traded 9,020 contracts and
the January 65 put traded about 8,720.
Najarian said IBM's decline helped push implied volatility
in the January series into the low 40s from an average in the
low 30s.
"That's a huge move," he said. "That's a 20 percent
volatility increase in a week."
But the options trader said it did appear some investors
were willing to take a short-term bet that IBM shares would be
able to rebound.
He noted heavy action in the December 105 calls, which
traded about 17,800 contracts. The option, which lost 7/16 to
3/4, had open interest of roughly 10,780.
Even so, Najarian said volatilities in several technology
stocks have risen sharply this week as investors had no qualms
about paying higher premiums for put protection.
He noted, for example, volatility in some Micron Technology
Inc January options was up in the 80 to 85 percent
range, from an average around 70 percent.
"People are just looking where they can to protect
themselves," Najarian said.
The impact of turmoil in Asian economies on company profits
was one of the main reasons for the technology group selloff,
and Najarian said the declines even hit companies with little
Asian exposure such as Compaq Computer Corp and Dell
Computer Corp .
Some of the heaviest, most concentrated action was in
software company Cadence Design Systems Inc , which was
down 1-11/16 at 22-7/8 in late trade.
The Cadence December 27-1/2 call traded 5,020 contracts,
the December 30 call traded 5,255, the December 27-1/2 put
traded 4,985 and the December 30 put traded 5,250.
A market maker said a customer was selling the calls and
buying the puts.
