Dow Changes Don't Push Tech Options Plays - TheStreet

Dow Changes Don't Push Tech Options Plays

San Francisco, home of the high-tech options, has a quiet response to a big change in the Dow Jones Industrial Average.
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SAN FRANCISCO -- "They should start calling it 'The

Dow

: The New

Nasdaq

.'"

At least that's the crack from one smart-mouthed market maker on the options floor of the

Pacific Exchange

, and Tuesday truly will be remembered as the day

Microsoft

(MSFT) - Get Report

and

Intel

(INTC) - Get Report

were added to the Dow Jones Industrial Average stock-market index.

But while the pair, along with

Home Depot

(HD) - Get Report

and

SBC Communications

(SBC)

, will be added to the Dow next Monday, the options activity in tech names here on the West Coast exchange was oddly muted.

"That's really the big story of the day," said James Burleson with

Letco

, a Chicago-based market-maker firm building up a presence on the San Francisco exchange floor.

Microsoft was the most-active option on the four major exchanges, along with

IBM

(IBM) - Get Report

and

Lucent

(LU)

, but "for all the hoodoo about these Dow additions, it hasn't been as busy as it should be," said one broker-dealer in the Microsoft crowd here on the Pacific Exchange.

"I've had at least one big order from

J.P. Morgan

for the November 95 puts, about 3,000 contracts that were parceled out to the crowd here," said the broker-dealer, who said he bought the puts for the customer at prices averaging about 3 1/2 ($350) per contract.

"We can't really figure out why it hasn't been more active, particularly buying calls -- possibly because people are waiting for more economic data this week," he added. Microsoft's share price gained 2 1/8 to 94.

In Intel options,

Nomura

apparently pushed its bets into the next millennia and purchased 3,000 April 90 calls and 70 puts, a strategy known as a "strangle," dated into next year. Prices for the calls logged in at 3 3/4 ($375) and for the puts at 5 7/8 ($562.50).

The addition of the two tech giants to the index also may provide a boost to the sluggish trading in Dow options. The contract will soon have enough of a technology component to make it a useful hedge against a broad portfolio of stocks.

Citigroup

(C) - Get Report

call buyers came running to the contracts on the news that former Treasury Secretary

Robert Rubin

would be joining the firm.

Even though Rubin won't have any line responsibilities, the reaction to his hire was positive. The stock jumped 1 3/8 to 49 3/16 by midday, and the November 50 calls traded more than 10,000 contracts. That volume drove the price up 9/16 ($56.25) to 1 1/4 ($125).

And

JDS Uniphase

(JDSU)

was also on the radar screens Tuesday, with the call prices up sharply with the stock, which has gained 8 1/16 to 145 1/8. Among the more active options were the December 140 calls, up 2 1/8 to 14 1/8.

The company has been able to use its stock as powerful

currency for acquisitions.