As shares of brokerage stocks soared on this options-expiration Friday, one of the leaders of the race to higher ground was oft-rumored takeover candidate
For months, takeover speculation, particularly on Fridays, has juiced up the options action and the stock price of the New York-based investment bank. And Friday is a key day for speculators fearing a deal will be consummated over Sunday brunch and announced before the market opens Monday.
Shares of Bear Stearns were soaring, up $6.63, or 11.9%, to $62.31. Option prices soared on Bear Stearns and other brokerage stocks Friday. It was unclear if the surge in the stock was due to another round of takeover chatter.
The November 65 out-of-the-money calls were up 3 ($300) to 6 1/2 ($650) on the
Chicago Board Options Exchange
. Call option buyers, who pay for the right to buy a stock for a specified price at a certain time, typically can be found playing to profit from takeover froth.
The implied volatility on Bear Stearns options was high Friday, said Paul Foster of
in Chicago. Implied volatility, the annualized measure of how much the market thinks a stock or index can potentially move, is reflected in an option's price, and increases with demand for certain options.
Foster said in an interview late Friday morning that Bear Stearns November 60 options' implied volatility reading was 112 for the calls, while for the puts it was 108, levels up sharply from earlier this week.
There was a lot of activity in the October options, however; those options expire today and the volume there could be just a matter of traders closing out positions rather than making any major bets.
stock sunk Friday, options activity in the diversified manufacturer wasn't indicating a clear direction for the stock, but there were trades showing that some investors are thinking the stock may have bottomed.
Shares of St. Paul, Minn.-based 3M were getting pummeled, swooning $4.44, or 5%, to $84.56, ahead of its earnings report, slated for release Monday. The eight-analyst
First Call/Thomson Financial
consensus estimate calls for the company to earn $1.24 a share in the third quarter. The 52-week intraday high for 3M's stock is $103.81.
A trader at the
said there was some put option selling, notably in the November 85 strike, where 500 contracts traded, although overall there wasn't a lot of volume in the options.
While put buyers are typically seen as bears, put sellers take in a premium against the risk of the stock falling and having to purchase shares at the strike price (85, in this case) to fulfill the contract's exercise.
That makes the basic strategy of a put sale bullish because the seller profits from the stock rising, or sitting still because the options expire worthless.
The November 85 puts were up 1 1/2 ($150) to 3 3/8 ($337.50). The November 90 puts were up 2 1/2 ($250) to 7 1/2 ($750), also on the P-Coast.