Philadelphia exchange launches new Internet index
December 9, 1998 08:35 PM
By Debra Sherman
CHICAGO, Dec 9 (Reuters) - The Philadelphia Stock Exchange and online financial information provider Thestreet.com, aiming to capitalize on the Internet craze, launched options trading on a new Internet index on Wednesday.
The index, called Thestreet.com Internet Index , gives speculators another opportunity to bet on the movement of a basket of 20 high-flying Internet stocks.
Some 800 options contracts on the index traded in about 50 separate transactions on the first day of trading, giving the exchange hope that this sector index will succeed where others have fallen short.
"We're encouraged," an exchange spokesman said. "We've had a lot of interest."
Yet stock-market sector indexes so far have not generated huge investor interest, said Jay Shartsis, director of options trading at R.F. Lafferty & Co.
"If this one isn't successful, I don't see how any of these sector indexes will be. How can you have a group that's this hot that doesn't translate into big volume?"
The American Stock Exchange, which has a pact to merge with the Philadelphia Stock Exchange, launched options on its Interactive Week Internet Index of 50 Internet stocks in October 1995, but it has found only limited interest.
Trading volume peaked in January 1996, registering 40,021 contracts for the month, or average daily volume of just 1,819 contracts. The latest surge in Internet stock prices in October and November generated only modest monthly volume of 10,809 and 13,932 contracts, respectively, in the index.
Thestreet.com spokesman Sean McLaughlin said one advantage the new index has over the AMEX's index was that the Thestreet.com's index of 20 Internet companies is equal-dollar weighted, meaning that the performance of small and large companies in the index will be represented equally.
The AMEX's index is weighted by capitalization, so Cisco Systems Inc. CSCO accounts for 37 percent of the index.
Still, the Chicago Board Options Exchange's Internet Index , which is dollar-weighed, has had a similar lackluster history, attracting only limited interest. Year-to-date average daily volume has been just 32 contracts.
Tom Bartlett, a market maker in the CBOE index, said the exchange recently redesigned the index and plans to promote the index more aggressively.
"We're already seeing better results," Bartlett said, noting that about 350 contracts traded on Tuesday and about 400 traded on Monday.
Paul Foster, investment strategist and editor of 1010WallStreet.com, said he was optimistic about the prospects for Philadelphia's index.
"The reason these other (Internet) indexes haven't done well is because retail paper has been weak. But Thestreet.com has a retail following, so it's a nice tie-in," he said.
"Once the Philadelphia exchange merges, they'll have AMEX money behind the index for marketing. Thestreet.com index has a better chance of succeeding than the others."
The companies in the index are:
Amazon.com Inc. AMZN , America Online Inc. AOL , At Home Corp. ATHM , BroadVision Inc. BVSN , CMG Information Services Inc. CMGI , Checkpoint Software Technologies CHKPF , <Egghead.com Inc. EGGS , Excite Inc. XCIT , Infoseek Corp. SEEK , Lycos Inc. LCOS , Macromedia Inc. MACR , MindSpring Enterprises Inc. MSPG , Netscape Communications Corp. NSCP , Network Associates Inc. NETA , Onsale Inc. ONSL , Open Market Inc. OMKT , Real Networks Inc. RNWK , Security Dynamics Technologies Inc. SDTI , USWeb Corp. USWB and Yahoo! Inc. YHOO .
McLaughlin said the index was designed to include companies that derive a majority of their revenue from the Internet, so that it would be a "pure play."
((Chicago Derivatives Desk 312-408-8750, chicago.derivatives.newsroom@reuters.com))
REUTERS
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