Trading in database server company
stood out in an otherwise quiet day for the options market.
Informix saw a lot of call trading in its February 7 1/2s and 10s and March 10s after its stock climbed on its earnings report
last night. The company posted earnings of 5 cents per share, beating analysts' expectations of a 16-cent loss, and its stock jumped about 20% to 8 7/8, up 1 1/2, today.
The in-the-money February 7 1/2 calls moved 3,300 contracts this morning. One options researcher suggested that investors may be liquidating previous positions now that the stock has moved on earnings. "Informix has about 69,000 calls in total open interest, compared to about 9,000 puts. It's ridiculously skewed; I can't imagine that investors are opening new positions today," said Joe Sunderman, senior research analyst at
Investment Research Institute
In addition, Informix likely is seeing some rollover action now that the earnings are public. The company's February 10 calls sold 2,000, almost similar in volume to the March 10s.
Rollovers are starting to become a bigger factor, as investors are moving with only six more trading days left in February after today. Movement in two other options series, for
, most likely was due to rollover activity. "It's coming down to the close next Friday, and I think investors are just shutting positions," Sunderman said.
3Com saw rollover of its February 35 calls into March 35s, with volume of 4,900 and 2,000 contracts, respectively. 3Com's stock climbed to 35, up 1 1/4, today in relatively heavy trading.
Compaq's stock was roiled -- dropping to 35 3/8, down 1 1/16 -- after
The Wall Street Journal
questioned its merger with
, suggesting the deal may be hiding cost problems at Compaq. The company's February 35 calls sold 2,700 contracts on open interest of only 3,600. The offsetting puts at February 35 sold 1,500 contracts.
Okay, okay. Maybe Larry McMillan
have a crystal ball. McMillan, who penned one of the standard texts for the options business and publishes an options alert newsletter, has been following steadily rising volume on
options. After Money Store posted solid earnings earlier this week, McMillan's alert this morning said the company "announced slightly better-than-expected earnings ... but the stock didn't have a big reaction. Since there has been so much recent option activity, perhaps there's another story yet to come." This morning, published reports said Money Store is seeking a suitor.
In a brief interview this morning, McMillan said he saw volume building in late January when the sub-prime lender was near a new low. Typically, the company's options traded about 1,400 contracts a day, but between that January low point and this week, McMillan said there have been several days at 2,000 and some more well above 3,000. Options traders interpret such spikes in volume (especially in out-of-the-money calls) as one of the first signs of a takeover, and this one was no different. In addition, another key indicator, rising implied volatility, was present at the beginning of this most recent run but stabilized, leaving traders and McMillan with even more questions. "Originally, it looked like a takeover, but lately the trading has been kind of helter-skelter," he said.
Today, that acquisition-inspired trading is focused directly on the February and March calls at the 30 strike, about 4 points out-of-the-money with Money Store shares up 1 1/2 to 26 3/16 today. The February 30, which has six days of trading left, hit the 750-contract volume mark and rose in price 3/8 ($37.50) to 9/16 ($56.25). The March 30s were up 1/8 ($12.50) to 1 1/8 ($112.50) on volume of 1,000.
"There was enough evidence for a good prosecutor to put together a case" for an acquisition, McMillan quipped.