NEW YORK, Dec 12, 2002 (ODJ Select via COMTEX) -- By Kopin Tan
Of DOW JONES NEWSWIRES
(Dow Jones)--A strong whiff of geopolitical uncertainty sent nervous investors to seek refuge in the perceived safety of gold and silver stocks, spurring robust trading of their bullish call options.
Although data on November retail sales did not disappoint, stocks nonetheless struggled under the weight of assorted news: that North Korea might reactivate a nuclear power plant, that Iraq may have supplied extremists with chemicals. The swirl of doubts about Bristol-Myers Squibb's accounting practices didn't help soothe investors' jangled nerves, nor did the prospect of higher oil prices should the Organization of Petroleum Exporting Countries cut production.
So investors flocked to gold and silver and their related options. The Philadelphia Stock Exchange's gold and silver index, or XAU, jumped 4.72 to 75.30. Its December 75 calls gained $1.55 to $2.30 as 614 contracts traded, compared with open interest of 1,931 contracts. The February 65 calls traded 3,422 contracts, compared with open interest of 729 contracts, and were at $12 in Philadelphia.
Options tied to gold-related stocks also were much sought after, as some investors bought calls both to speculate or to cover short positions. Newmont Mining Corp. saw its stock rise $1.11 or 4.1% to $28.11. Newmont's calls traded briskly across various strike prices and expiration months. Its January 30 calls, for instance, traded 2,596 contracts, compared with open interest of 9,349 contracts, and gained 40 cents to 95 cents at the Chicago Board Options Exchange.
Gold Fields Ltd. increased $1.29 or 9.8% to $14.47. Its January 15 calls traded 1,077 contracts, compared with open interest of 4,631 contracts, and gained 55 cents to $1.10. Barrick Gold Corp. stock edged up 58 cents to $15.70. Its April 17.50 calls, for example, traded 628 contracts and rose 20 cents to 95 cents at the International Securities Exchange. Open interest was 2,171 contracts.
Motorola's calls also traded robustly. Jon Najarian, a CBOE trader and commentator with financial Web site TCBNews, said speculators might be favoring these bullish calls because they believe demand for chips used in mobile telephones and personal computers could improve sales next year.
Motorola stock was unchanged Thursday afternoon at $9.55. Its January 10 calls, for instance, traded 6,372 contracts, compared with open interest of 21,929 contracts, and gained 15 cents to 80 cents at the CBOE.
Elsewhere in the options market:
- Might the nation's oldest exchange soon become one of the first stock or option exchanges to sell shares in itself to the public?
The board of the Philadelphia Stock Exchange has authorized its chairman and chief executive to develop a plan toward the exchange's demutualization. This conversion from a member-owned entity into a shareholder-owned, for-profit corporation could pave the way for the 504-seat exchange founded in 1790 to one day go public.
"We are moving forward with it, and it's definitely on the 2003 agenda," said chairman Meyer "Sandy" Frucher of the push to demutualize, although he would not be more specific about his timetable.
When that happens, the Philadelphia exchange could join the growing list of U.S. financial markets with public ambitions, reflecting a trend that has taken hold overseas. Outside the U.S., markets including the London Stock Exchange, the Deutsche Boerse AG in Frankfurt and the Singapore Exchange Ltd are all publicly traded.
Within the U.S., the International Securities Exchange, an all-electronic option exchange founded in May 2000, earlier this year completed its demutualization, thereby separating economic ownership of the exchange from trading rights - although the ISE has yet to detail plans for an initial public offering. And just last week, the former Chicago Mercantile Exchange, the largest U.S. futures exchange, debuted as a publicly traded stock on the New York Stock Exchange under the name Chicago Mercantile Holdings Inc. and the symbol CME.
"The effort to demutualize is a mature phenomenon in the international markets and is becoming a more prevalent and preferred corporate structure among U.S. exchanges as well," Frucher noted in a statement.
Among potential benefits, the exchange believes a demutualized structure will make it more agile in the marketplace, open the doors to relationships with strategic partners, and boost the exchange's ability to extract more value from assets like licenses and proprietary technology.
- The ISE on Friday will begin listing options on the iShares Russell 2000 Index Fund, or IWM, an exchange traded fund that tracks the small-stocks sector.
The listing marks the ISE's increasing push to list options pegged to broad market segments, now that the two-year-old all-electronic exchange had listed more than 500 stock options. The ISE currently does not trade any index options. But among its listed options that are pegged to industry or market segments are options on iShares Trust Nasdaq Biotechnology Index Fund, or IBB; the iShares Standard & Poor 100 Index Fund, or OEF; and the Nasdaq 100 Tracking Stock, or QQQ.
