The chickens, the Boston ones at least, may be coming home to roost.
As recently as last week, optimists were still circling
waiting for the fast-food chain's comeback and using call options to speculate on an upward move. Today, however, with the stock lagging near 9, put speculators have entered the market with plays on the company's December 12 1/2 and November 10 options, sentiment carried along by the company's failure to meet third quarter estimates. Analysts had anticipated BOST would earn 20 cents a share, but they came in with earnings of 16 cents a share. The company also said it was considering restructuring its franchise system.
Early volume on the December 12 1/2 series hit more than 3,500 contracts in early trading, marking two possible plays on Boston Chicken, according to analysts. Just last week, open interest on the options was 105 contracts.
Bill Yates of
said investors could be selling puts on the chance that the stock isn't going to drop much lower, allowing them to buy at close to a true bottom and ride the stock back up. If the activity is coming from put buyers, the hope would be that the stock goes down further, he said. Those strategies could also include ownership of the underlying shares, Yates said, giving the day's activity a few more rationales.
The November 10 put volume hit 2,729 at midday on open interest of 1,534, showing mostly new positions being set for some increased short-term movement.
Despite a stock price that has fallen steadily since January, November 15 calls had open interest of more than 9,200 and had seen some strong volume days, showing that at least one portion of the market was betting that the fast-food restaurant was on its way back. By last Thursday, however, investors began opening options positions in Boston Chicken's November 15 and December 12 1/2 puts, a bet that selling the stock at that price was the best they could hope for before the end of 1997. By today, the November 15 puts had built up open interest of 9,693.
Those positions could be abandoned for positions closer to being in the money, Yates said.
In other options activity today:
Brazil's terrible market situation are wreaking havoc on the options in
. The stock, which traders call "the Brazil country fund," was a screaming Latin American buy just last week, but the Brazilian market woes have slapped the options and the company's share price. Investors are shuffling positions, sending volume up in the December 120 and 130 puts and the December 135 and 160 calls. The December 90 puts also are seeing significant volume.
Telebras investors have been caught in two stomach-turning situations in the past week. First the company's continued privatization was finalized, but didn't give Telebras the kind of monopoly it expected to have on Brazil's telephone service. And this week, the Asian Contagion (we liked the 1994-95 'Tequila Hangover' a lot better) infected Latin America and Brazil's currency. The government hung tough and is buying its own currency and raising interest rates, giving investors slightly more optimism. But the markets remain dangerous in Brazil.
A pleasant earnings surprise yesterday has prompted some
options activity. With the stock trading at 65 this morning, investors apparently closed out a December 60 call position and rolled into a March 70 call, essentially setting a new target for the marine transport firm's medium-term outlook.