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Big Options Trades Find Tight Spreads

Competition is heating up, especially in pursuit of Microsoft volume.

Attention, options customers! There's a blue-light special, particularly in heavily traded, multiple-listed options such as




The nation's four options exchanges are continuing to slash prices and wooing customers with tight spreads on popular options, and if you're a customer, each exchange wants you -- yes, you! -- to send your order flow its way. The exchanges are hoping that competitive pricing will attract more volume and new franchises in the trading of certain listings.

"Price improvement on options is indicative of what's happening in multiple listings," said Mike Schwartz, options dean with

CIBC Oppenheimer

. "Customers can shop an order and have the floors compete against each other. They've been very aggressive, but it's a fluid situation. Will these prices continue? Wait six months, see which options firms are still in business and whether there will even be four exchanges left. Maybe there will only be two," he said, referring to the top-ranked

Chicago Board Options Exchange

and the

American Stock Exchange


For instance, Schwartz said, the

Pacific Exchange

was "aggressively outbidding other exchanges on the last Friday expiration" for Microsoft options, even paying slightly above parity.

For customers, the question is, "Are these great prices window-dressing? Are my market makers doing my orders and taking a loss? It's too early to tell," Schwartz added.

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Another 10,000-contract Microsoft trade crossed late Wednesday, but this time on the Amex. The No. 2 exchange also snagged two 3,000-contract orders Thursday in the Microsoft 2001 January 45 and 47 1/2 puts, at prices of 9/16 and 11/16, respectively.



put-buyers proved prescient after the company said Thursday that its earnings next year should show a percentage gain in the low- to mid-teens.

Maytag puts were active

weeks ago, when the 2000 January 55 puts were trading at 3 1/2 ($350). Those same options cost 11 1/2 ($1,150) Thursday.

Since that first flurry of put-buying, the stock has fallen from 59 to around 35. Quick, call the Maytag repairman.

Heavily traded October 50 calls in



also rose from 3 ($300) to 5 1/4 ($525) since the

first time they showed unusual action on Sept. 10.

Though the talks between Sprint and telecommunications giant

Deutsche Telekom


reportedly heated up and have since cooled off since the summer, Sprint's stock price has moved up from around 48 to 52 currently.

Finally, enterprise software company

Aspect Development


logged call-buying in most of its November strike prices, prompting option expert Lillian Seidman of

Miller Tabak's

options team to call them "cheap, cheap, cheap. Looks like someone's taking a position here, but no takeover."

Aspect's stock price was up 1 1/16 to 26 5/16.