Options investors focused on the financials Monday ahead of a key
Federal Open Market Committee
meeting on Tuesday, again favoring heavy trading in bank stock options over concerns the
might raise interest rates.
Volatility, a key part of options prices, inched higher for most of the session as traders worried about a sharp selloff in the stock market. The option market's fear gauge, the
Chicago Board Options Exchange's Market Volatility Index
, or VIX, edged higher to bob slightly over 30, compared with a historical range of 17 to 25.
Among the most active were
, which despite relaunching an online banking Web site, saw its stock fizzle down 1 13/16 to 60 1/4.
"The August 65 calls are really moving around, but then again, all the financials have been smashed with bonds falling so much," said Scott Barker, portfolio manager with
, a Los-Angeles based unit of
United Asset Management
. Bank One's August 65 calls trading on the
slipped 5/8 ($62.50 per contract) to 2 1/2 ($250) on volume of just over 2,500 contracts. Those traded on the CBOE slipped 13/16 ($81.25) to 2 7/16 ($243.75). Open interest totaled 6,930 contracts.
share price slid 1 1/6 to 34 13/16. That and all the negative sentiment surrounding financial issues may have prompted the September 40 puts to pick up 1 1/8 ($112.50 per contract) to 6 1/8 ($612.50) on volume of 1,050. The corresponding open interest in that option series totaled a mere 10 contracts.
"It's going to be an interesting expiration," added Barker. "The market is cooling down a bit, and now it's a question of whether that will continue through Tuesday or through the end of the week."
Among technology issues,
call options were also active Monday ahead of an earnings release following the close of trading.
A trader in the Chicago crowd said at least one customer was rolling out of deep in-the-money May 55 calls and into November 60 calls to the tune of 6,500 contracts. "They've rolled this spread for the last 2 1/2 years, and that's that," he said. The May 55s dropped 1/2 ($50 per contract) to 30 ($3000) while the Novembers were down 1/2 ($50) to 27 1/2 ($2750).
When it comes to earnings, Hewlett has a
history of topping out a big run in the stock with a poor performance, though there was still plenty of call buying last week in anticipation of the numbers on Monday. (Call buying is generally interpreted as a bet the stock price will rise.)
As originally published, this story contained an error. Please see
Corrections and Clarifications.