Options market investors were holding off on their sparklers and firecrackers and were instead getting some work done on an unusually active morning ahead of the holiday weekend.
Of course, it's unlikely most trading desks will have the bodies to get a good checker game going during the afternoon session.
While options traders were at their desks, however, much of the action was directed at the tech sector as new plays for the second half of the year were unfolding in bullish fashion. "You have all these tip sheets and market gurus handicapping the market for the next six months, and most of them are bullish and focusing on tech stocks," said Stewart Winner, director of retail options at
A lot of investors were positioning themselves in those stocks over the past several days and driving prices higher. Options players are now seeing pop in the stock prices and getting into the options, mostly by buying calls or selling puts.
Winner offered the example of
, which was up 2 3/16 to 70 3/8 this morning. The stock's 52-week high is 72 1/2, and Winner expected the stock will likely top that and continue higher. Given that, the in-the-money July 67 1/2 and 70 calls were getting his attention.
He wasn't alone. The July 67 1/2s traded 1,278 contracts at 4 1/4 ($425). The stock needs to climb another 1 3/8 by the July 16 expiration to make an exercise profitable. Similarly, the July 70s traded 835 contracts at 2 3/4 ($275), up 1 ($100).
"There are good opportunities to buy, but investors have to be selective," said Scott Fullman, chief options strategist for
Swiss American Securities
. Fullman worried that there isn't enough fear in the market. "I think the
the volatility index being under 20 is a giving a sell signal that there's too much optimism," Fullman said.
Beyond that, Fullman also noticed heavy activity in some of the techs, especially
, two that were named in
"10 Uncommon Values"
list. "I think a lot of buyers are supporting those stocks
in the Lehman list, and options players also are taking bullish positions," he said.
A lot of investors are employing call-buying and put-selling strategies today, especially in near-the-money strikes. Some of the tech stocks that have seen big increases in their options prices would be great candidates for this strategy, Fullman suggested.
, for example, investors can buy August 70 calls at 4 3/8 ($437.50) or sell August 65 puts for 2 1/6 ($206.25). "If it goes down, I get Lucent put to me at 62 15/16, and I don't mind owning it at that price," he said. Lucent was up 1 7/8 to 69 15/16 this afternoon.
Another Ticker Mix-Up?
saw a massive speculative play on its October calls as 2,010 contracts of its October 22 1/2 calls and 4,000 contracts of its October 25 calls moved this morning.
The stock was at 19 3/8, unchanged. The calls seemed to go out under buying pressure, since both trades went out at the ask price.
However, the trade comes a day after a massive mix-up of stocks yesterday led to a huge run-up in the price of
ABR Information Services
One reason given was the possible mistake in recording the ticker symbols of ABR and
, which has a similar symbol. Barrick Gold's ticker is ABX, also close to those in question.
Is someone betting on another error in his or her favor? Doubtful, said one options trader. "Barrick is seen as a pretty decent gold play," he added.
The volume looked like it could have been a spread trade in which an investor sold 4,000 of the October 25 calls to finance the purchase of 2,000 of the October 22 1/2 contracts. If the stock lands anywhere under 25 by the last week of October, the trade looks like a moneymaker.