Options Report: Big Year For Options; Alcoa Calls Slump
One area of trading that has seen explosive growth this year is the options market. Year over year trading volume in June jumped over 30% and is up 25% for the first half of the year, according to the Options Industry Council.
One beneficiary of the boom is online broker optionsXpress Holdings which posted a 29% jump in its 2nd quarter profit, on a 25% rise in revenue to $58.4 million.
optionsXpress chief executive officer David Kalt says he "sees great growth ahead", adding that, "alot of the growth over the last three or four years has been on the institutional side and hedge fund community but that were just in the third or fourth inning in terms of retail investor participation."
A Jilted Alcoa?
Alcoa call options are getting hammered today on a report in The Australian newspaper that BHP Billiton is going to pass on making a buyout offer for Alcoa . The Austrialian cited sources that it did not identify. BHP, according to the report, "never even got close to making a pitch" for Alcoa and further reported that BHP might actually be interesting in making a bid for Freeport McMoRan .
Among the most actively traded Alcoa calls is the August 50 contract which also has the biggest open interest at over 70,000 contracts. It's down $1, or over 60%. The July calls, which expire tomorrow, are getting crushed -- including an 80% tumble in the price of the July 45 calls.
Speculators have been hoping BHP would materialize with a bid of more than $40 billion for Alcoa.
The Australian article did not mention the potential interest of Companhia Vale do Rio Doce ,which has been cited as a possible suitor for Alcoa.
Starbucks & Hershey
A sweet deal with Hersheyis paying off for Starbuckscall options holders.
The calls in Starbucks have been among the most actively traded stock options in the Thursday session. The surge in volume comes following word the gourmet coffee retailer will begin offering chocolate flavored coffee products under an agreement withHershey .
Over 19,000 at-the-money July 27.5 calls traded by 1 p.m. New York time. The news comes just a day before expiration, lifting the stock by about 3% and the price of the contract by 380% to 24-cents. Nearly 25,000 of the August 27.5 calls also traded, compared to volume of 1,300 contracts on Wednesday.
Some online services attributed the burst of Starbucks options volume to vague "takeover chatter" with Pepsico named as a possible suitor. A Pepsico spokesman declined comment on market speculation, and added that there were no changes to existing partnerships.