Watch and wait. And maybe nibble at some stocks.
Tuesday's economic data are the hinge on which the options market will swing this week. The data represent just one sentiment indicator for what could be a crazed monthly options expiration Friday. "We will be loading the bases with call options if Tuesday's CPI and market action give us the green light," said David Schultz with
Summit Capital Holdings
Why load the bases a few days before Friday's expiration? Schultz points out that some options are still relative bargains, including at-the-money or slightly out-of-the-money call options on the OEX, the
Standard & Poor's 100
index option. "Two weeks ago, investors were willing to put some money in some individual stories, though not the market as a whole," he said. "We've been buying
calls as a proxy for the market and nibbled at the OEXs. A positive opening
on the CPI data could bring another 100 points."
At midafternoon Monday the OEX was trading at roughly 690, and August 700 calls were going for 2 3/16 ($218.75), up 3/16 ($18.75). "They aren't a bad gamble, since they're fairly inexpensive and we're only 10 points away," Schultz explained. "We could get there pretty fast."
GE's September 105 calls "have run up a bit, got 'em at 4 3/4 up to 6 3/4, that's an in-the-money call, so I'd still be a buyer at these levels," Schultz said. "Why September? You don't want everything to go poof all at once."
Investors also were piling into call options of bellwether technology stocks such as
ahead of Tuesday's economic data and a hoped-for stock market rally.
was among them as well. With the shares up 1 1/4 to 71, the August 70 calls traded more than 1,800 contracts and rose 3/4 ($75) to 3 7/8 ($387.50) on the day.
Must See TV
finally got the buyout offer that the market had
speculated about for four months.
Shares of Nielsen soared 4 3/8 Monday to 37 3 16 after Dutch publisher
said it planned to buy the television-ratings agency in a $2.5 billion cash deal. That's a per-share package of $37.75 a share, and including Nielsen's debt, the size of the deal totals $2.7 billion. Nielsen's August 35 calls shot up 1 1/8 ($112.50) to 2 1/4 ($225).
Mettling With Reynolds
Let's get hostile.
options again topped the most-active list after
began an all-cash tender offer at $65 a share. This move followed the Reynolds board's rejection yesterday of Alcoa's $65-a-share cash-and-stock bid.
Alcoa said also it will seek a new board that would alter Reynolds' "poison pill" rights and take other unspecified steps to facilitate a sale of the company.
Reynolds Metals stock was down 1/4 to 69 1/8, and August 65 in-the-money calls slid 1 ($100) to 3 7/8 ($387.50) in sympathy. Its September 70 calls slipped 7/16 ($43.75) to 2 1/6 ($206.25) on volume of over 2,600 contracts, and open interest of 3,069.