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LEAPS Players Rolling Profits into 2000

With most long-term options deep in-the-money, traders are movin' on up.

With January's options expiration scheduled for Friday, last year's long-term call buyers have begun cashing in their hefty long-term gains and anteing up for 1999, traders said.

Late last week,

Salomon Smith Barney

options strategist Kevin Murphy said he was seeing the beginning of the leap from LEAPS (long-term options). "People who put on LEAPS positions last year are looking at huge profits," Murphy said. "They're $30, $40 and $50 in-the-money now. Some people are rolling them another year."

That kind of trading was evident among the big-volume contracts moving across the

American Stock Exchange

options floor. In


(PFE) - Get Pfizer Inc. Report

, for instance, a trader closed out more than 8,000 of the 1999 January 37 1/2 calls for about 80 5/8 ($8,062.50) and jumped into the 2000 January 80 calls for just over 44 ($4,400) per contract.

On most days, it could actually make a difference if the underlying shares were down on a day when an institution was hoping to close out a position. Today, in Pfizer, the stock was down 4 1/8 to 118 1/4 and it mattered little to someone closing a 37 1/2 call.

"If they have a long-term capital gain, they just roll them out. If I had one of these LEAPS, I'd be inclined to start the year off by taking some profits and just rolling out into another strike," said Michael Schwartz, senior options strategist at

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CIBC Oppenheimer

. Because their 1999 LEAPS had appreciated so much, the traders could take a position of similar size in 2000 LEAPS for about half the price, and keep the remaining juice as a long-term gain.

Outside of the big volume on some specific LEAPS, there wasn't widespread speculation seeping into the options market today. The put/call ratio, however, stood at what some consider a dangerous 0.31, meaning that investors were trading 31 puts for every 100 calls.

"That fact that we're seeing enormous call buying with the market down shows that we've hit a belief stage, and the implications of that are negative," said

R.F. Lafferty

options head Jay Shartsis. "Investors are still mesmerized by the Net stocks and are saying, 'Get me in at any price.' The boat has gotten too crowded."

Word of the


(INTC) - Get Intel Corporation Report

Pentium 3 chip combined with tomorrow's earnings has that company's options trading heavily.

With the chip maker's shares up 8 to 137 7/8, more than 4,300 of the February 140 calls had traded. The January 140s, however, were more active as speculators sent volume over 8,000 by midday. That volume provided the juice for a price jump of 2 3/8 ($237.50) to 3 ($300).

That pricing, though, has little time premium and no intrinsic value built into it, so the jump reflects increasing short-term volatility in Intel's options.