Philip Morris Puts Roll as Holders Look for Insurance
Hold on loosely, American Stock Exchange options traders were saying, but don't let go. To options in Philip Morris (MO), that is: Salomon Smith Barney Monday traded a whopping 20,000 contracts.
Like Microsoft (MSFT) and some Internet issues, Philip Morris is a lucrative and popular option that, until a recent listings war among the nation's top options exchanges, traded in only one place. Once the exclusive purview of the Amex, Philip Morris options now trade on all four exchanges. But war has brought prices down and sharpened competition among market makers, and jumbo institutional customers are showing more of their orders ---such as the 20,000-put Big Mo order -- to the floor. The trade clocked in as 20,000 puts, expiring in January 2000 at a strike price of 40; Solly paid roughly 6 1/8 ($612.50 per contract). The stock was trading at 34 9/16, up 1/4. After a five-year criminal investigation ended without any indictments, Philip Morris, R.J. Reynolds (RJR) et al. last week found out they face a civil suit from the government.
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Linkage Arrives?
Interactive Brokers, part of the Timber Hill options-trading firm, said Monday that it will offer a new trading station technology featuring automated, best-price execution for U.S. equity options traded on more than one exchange. Who cares? Well, if you're a retail investor, you should. "Linkage," or lack of it, has been a major problem for options customers. Unlike equity exchanges, options exchanges aren't united by any automatic electronic network showing the best prices offered by the top four exchanges. Interactive Brokers has enlisted Wall St. Access to try out the software, which the firm is marketing as "aggregator" of all the bids and offers from the four exchanges -- in essence, a sort of substitute "linkage" system for which securities regulators have been pounding the table. Question is, does Interactive Brokers want to compete with the International Securities Exchange? The ISE is filing to become a new exchange and preparing to launch options trading in March 2000. "It's going to be a question of cost," said Michael Schwartz, options dean with CIBC Oppenheimer in New York. A spokesman for Interactive Brokers said the firm isn't directly competing with the ISE. "We simplify the process of routing the order to best price. We charge a premium for that," he said. ISE will be "just another platform" for which Interactive Brokers' trading station culls prices and routes orders. "Plus, they're not in business yet," the spokesman said.>To order reprints of this article, click here: ReprintsTheStreet Premium Services For Personal Service: 877-471-2967
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