Yahoo! Rumors May Be Drawing Speculators to Vivendi Options
By Brian Louis
Staff Reporter
3/7/01 12:13 PM ET

As speculation swirled over Yahoo! (YHOO:Nasdaq - news) today, there was significant put buying in Vivendi (V:NYSE ADR - news), one of the many suspects rumored to be interested in Yahoo!.


Volatility Index
Today % Change
27.62 +0.66
Source: ILX

Shares of Vivendi were up 3 cents to $64.64 after trading down as low as $63.45 intraday. A major investment bank was buying the out-of-the-money Vivendi March 60 puts on behalf of a customer or customers, a trader said. Investors buy put options to either protect a long position in a stock or to speculate on further downside in the stock.

Trading in Yahoo!'s stock has been halted since about 9:45 a.m. EST for news pending. When trading was halted in Yahoo!, the stock was down $1.38, or 6.2%, to $21.

Nasdaq Volatility Index
Today % Change
68.89 -0.20
Source: ILX

On the Chicago Board Options Exchange, the March 60 puts saw volume of 800 contracts, compared to open interest (the total number of options contracts that have not been exercised or allowed to expire) of 120 contracts as of yesterday's close. The puts fell 0.60 ($60) to 0.30 ($30).

Volume on other exchanges in that strike price was notable, too. On the Philadelphia Stock Exchange, 750 of the March 60 puts changed hands. Late this morning, the total volume for call options among the exchanges that trade Vivendi options was 54 contracts.

Investors could be speculating that if Vivendi does make a bid for Yahoo!, its stock will fall, and thus the put options will appreciate in value. Most often, the stock of a company making an acquisition falls.

Judging by the cheap price of the March 60 puts, the situation could involve investors taking cheap chances that a deal might be in the works. With the contracts trading at 0.30 ($30), that's not a huge outlay to take on what could arguably be a long-shot bet.

Options trading in Yahoo! was light ahead of the halt in trading of the stock. The Yahoo! March 20 puts were the most active Yahoo! option, however, only a scant 105 contracts traded this morning before the halt. The puts rose 1/8 ($12.50) to 1 1/8 ($112.50) on the CBOE. Meanwhile, 100 of the March 30 calls traded on the PHLX, unchanged at 1/4 ($25).


<center>

<HR>

</center>