After a lightning-fast rotation out of cyclicals, suddenly options investors are wading into pharmaceutical and tech stocks again.
Institutional strategists were pounding the ol' metaphorical table on drug-stock options Thursday, in some cases based simply on the fact that the sector is so "washed out," in the words of one, that it seems it can only improve.
It was difficult to pinpoint whether the drug plays were active in anticipation of company-specific news or just on the general rousting in the sector.
"A lot of the drugs, the HMOs, the hospital-management companies are concerned about the government's year 2000 budget for
. They're all on tenterhooks," the Chicago trader said.
, all those guys have really gotten crushed back to where they were in October, in some cases," said Rod Jamieson, an options strategist at
. "These could be very tradable bounces, and we'd be looking at in-the-money options. If you don't mind owning the stock at these levels, it could be time to sell some puts."
Among the more active Pfizer options were the September 105 calls, up 2 ($200) to 10 3/4 ($1,075) on volume of 350 contracts. The shares gained 3 7/16 to 104 7/16.
clocked in a trade of 700 contracts in July 80 puts, compared with open interest of 1,130.
The puts were flat at 1 ($100), indicating that a seller could be at work trying to take in some premium on the hope that the stock is not heading south in the near future. The stock was up 1 to 86 1/16.
Hey, and let's not forget the Internet sector.
"People were blindsided by the decline Wednesday, and I'm not sure they're believing much in today's rally," said Kyle Rosen, the head of hedge fund
Rosen Capital Management
. "It could be the first leg down of more to come."
While he said he generally doesn't get involved with Internet stocks, "I do have small positions on the long side for a quick trade. As bearish as I am on the Internet options -- and I'm bearish going three months out on the market -- today is a day they go up, not down. And very short term, if we get a two- to three-day bounce, I'd be an aggressive seller into that."
A large block of August 50 puts in
didn't go by unnoticed; the out-of-the-money August 50 puts gained 1/2 ($50) to 3 ($300) on volume of 5,010 contracts. The stock, down 1 1/4 to 51 1/2, has been on an uptrend recently.