options were hopping this morning after
The Wall Street Journal
Johnson & Johnson
was in talks to buy the company for more than $12 billion in stock.
The report sent shares of Alza surging $7, or 23%, to $37.05. Options action was robust as the prices of call options soared. The
reported that while exact terms of a deal couldn't be determined, J&J is planning a stock swap that would value Alza between $42 and $48 a share. Shares of J&J slumped $2.77 to $85.44.
From time to time, there has been unusual activity in Alza's options, including heavier than usual volume and a big spike in the prices of the options. A recent
example was in early February, when the volume and prices of the options soared.
Paul Foster of
in Chicago said Alza's ramp-up this morning shows investors are putting confidence in a J&J deal. Foster noted that the implied volatility -- the market's estimate of how much the underlying security can move -- on Alza options was markedly high on Friday, closing out at 65, while it has only risen up to 68-69 today. Options volume, however, was unremarkable on Friday.
Optionswise, there was some activity in
out-of-the-money calls on Alza, with a decent amount of volume seen in the April 40 calls. The April 40 calls soared 1.15 ($115) to 1.40 ($140) on volume of 2,100 contracts, compared to open interest of 3,309.
Meanwhile, call options with strike prices above 40, however, weren't generating much interest. The April 42 1/2 calls were seeing a bit of volume on the
American Stock Exchange
, with 197 contracts trading. The calls rose 0.30 ($30) to 0.60 ($60).
Nasdaq Stock Market
announced this morning it is partnering with the
London International Financial Futures and Options Exchange
to list and develop single-stock futures for U.S. and European customers.
The contracts will be listed on Liffe's electronic trading platform. Liffe already lists single-stock futures on seven U.S. companies. U.S. investors, however, currently cannot trade single-stock futures and will have to wait until December before they can. Legislation last year was enacted that lifted the nearly 20-year ban on the trading of single-stock futures in the U.S.
The move represents a competitive threat to the U.S. options industry because the single stock futures could be used for hedging and speculation, the same way listed options currently are used.
Nasdaq and Liffe said they will form a U.S.-regulated entity, which will list single-stock futures on Liffe's trading platform.
Liffe initially listed 25 single-stock futures products in late January. According to Liffe, single-stock futures can begin trading on Dec. 21.