Options Trading

The bears are out on Facebook Inc. The social networking giant's stock price closed down $3.07, or nearly 10%, to $28.84 on Tuesday. The precipitous drop began when Facebook went public May 18; since then shares have fallen 24%. Since the IPO, Chief Executive Mark Zuckerberg has watched his business endure technical problems on the Nasdaq exchange and skepticism from analysts, many of whom believe the stock was overpriced and...

The bears are after Facebook Inc. Shares of the social networking giant continued a precipitous plunge since the company's much-hyped initial public offering. The stock notched a 10% drop Tuesday and has lost about a quarter of its value since going public May 18. Facebook is now trading below $29, a stunning drop for the biggest tech IPO in history. And traders are placing bets that the stock will erode further. "It's been a one-way ride so far, and it's hard to say if the stock has hit bottom," said William Lefkowitz, chief options strategist at VFinance Inc. in New York.

Options are contracts that give their holders the right, but not the obligation, to buy or sell a given commodity at a set price within a certain period. In the case of Security Pacific's options-trading program, the underlying commodities will be U.S. government securities such as Treasury bills and Treasury bonds.

Pep Boys' stock plunged 22% following the collapse of a buyout deal with a Los Angeles-based private equity firm. The Philadelphia-based automotive retail and repair chain on Tuesday announced the termination of its planned $1.1-billion buyout by The Gores Group. Pep Boys, which has 130 shops in California, said Gores would pay the company a $50-million termination fee and reimburse it for expenses related to the aborted merger, according to a filing with the U.S. Securities and Exchange Commission.

Not all trading has dried up in the securities markets. Futures and options trading rose 37% to a record last year, led by contracts tied to stock indexes and interest rates, the Futures Industry Assn. said Thursday. Futures and options trading at 56 exchanges rose to 6 billion contracts in 2002, from 4.38 billion in 2001, FIA said. Trading in contracts tied to equity indexes accounted for most of the gain, rising 86% to 2.79 billion contracts.

The SEC gave permission for a one-year pilot program allowing options trading on six highly active over-the-counter stocks, beginning Oct. 1. The National Assn. of Securities Dealers will be allowed to trade in both options and their underlying stock. The experiment was approved on condition that the six stock exchanges be permitted the same right, even though the six stocks are not listed on those exchanges. The stocks were not specified in the decision.

The New York Stock Exchange announced that it has selected four over-the-counter issues in which it will trade options starting next month. The high-technology stocks, including Apple Computer and Apollo Computer, are volume leaders in the National Assn. of Securities Dealers' national market system. The SEC last month approved limited trading in OTC options and their underlying stock on the nation's major equity markets.

Allergan Inc. options trading picked up Tuesday amid speculation among some investors that the company could be acquired in the next few months, analysts said. There has been continuing speculation that Pharmacia & Upjohn Inc. could renew acquisition talks with Allergan that were broken off in May. There were 685 call options traded, giving investors the right to buy Allergan shares at $40 each before Sept. 21. The highest number of the September $40 contracts traded previously was 415.

Trading in options to buy shares of Dow Jones & Co. surged to an 18-month high Monday, indicating that word of News Corp.'s $5-billion bid for the company may have leaked in advance of Tuesday's announcement. "Somebody knew this deal was coming," said Jon Najarian, co-founder of OptionMonster.com, a Chicago-based provider of financial data on unusual trading. "I don't think there's any such thing as coincidences on Wall Street."

Unusual buying activity of bullish options on Gillette Co. ahead of its pending purchase by Procter & Gamble Co. is raising eyebrows among some options market players. Some traders appear to have won the jackpot on the first news of the planned merger of the consumer product giants, which trickled out Thursday evening. Before the announcement, some lucky players appeared to have bought Gillette's February call options, giving them the right to buy what is now a $51 stock for $45.

The bears are out on Facebook Inc. The social networking giant's stock price closed down $3.07, or nearly 10%, to $28.84 on Tuesday. The precipitous drop began when Facebook went public May 18; since then shares have fallen 24%. Since the IPO, Chief Executive Mark Zuckerberg has watched his business endure technical problems on the Nasdaq exchange and skepticism from analysts, many of whom believe the stock was overpriced and...

Investors who missed out on Facebook's initial shares have another option, literally. The Chicago Board Options Exchange will start listing option contracts on the social-media giant May 29, according to specialist firm Susquehanna Investment Group. The company's options are expected to be among the most heavily traded and volatile in the market. This approach allows investors who missed out on the initial trading to pick and choose prices in the options market. An option that gives the investor the right to buy the stock at a specific price is termed a call.

With Maicer Izturis on the disabled list and Erick Aybar possibly to follow, the Angels concede they might need to acquire a shortstop via trade or free agency. "Hopefully, our injury situation isn't long-term," General Manager Tony Reagins said. "If it is, you'd probably have to look outside the organization." Reagins said he has gotten "encouraging reports" on Aybar, who injured his left knee Monday. The Angels said Aybar had "meniscal damage" but would not say whether the cartilage was torn or whether the injury would require surgery.

The Nasdaq Stock Market's agreement to acquire the Philadelphia Stock Exchange for $652 million in cash gives the largest U.S. electronic stock market a foothold in the fast-growing options market. The deal, unveiled Wednesday, comes as many of the world's exchanges are succumbing to a wave of consolidation aimed at boosting market share and protecting profits as competition mounts from electronic upstarts.

Trading in options to buy shares of Dow Jones & Co. surged to an 18-month high Monday, indicating that word of News Corp.'s $5-billion bid for the company may have leaked in advance of Tuesday's announcement. "Somebody knew this deal was coming," said Jon Najarian, co-founder of OptionMonster.com, a Chicago-based provider of financial data on unusual trading. "I don't think there's any such thing as coincidences on Wall Street."

Unusual buying activity of bullish options on Gillette Co. ahead of its pending purchase by Procter & Gamble Co. is raising eyebrows among some options market players. Some traders appear to have won the jackpot on the first news of the planned merger of the consumer product giants, which trickled out Thursday evening. Before the announcement, some lucky players appeared to have bought Gillette's February call options, giving them the right to buy what is now a $51 stock for $45.

The Chicago Board Options Exchange said Tuesday that it is investigating trading of Zayre Corp. options in what one member called "probably the most blatant insider trading scandal I've seen." The alleged irregular trading activity occurred in mid-September, just before a newspaper reported that Zayre, one of the nation's largest discount-store chains, may be the target of a takeover bid.

The Chicago Mercantile Exchange overwhelmingly approved a plan Tuesday to create an electronic trading system allowing investors worldwide to buy and sell financial futures and options around the clock. Exchange spokeswoman Julie Jacobs said 3,939 exchange members, or 88%, voted in favor of the new system and 526 voted against it. "Everyone is very pleased, obviously," she said. Exchange officials and industry analysts had predicted members would ratify the proposal by a wide margin.

Hedge Street Inc., founded by Portola Valley, Calif.-based investment company Pareto Partners, got approval from the Commodity Futures Trading Commission to start an electronic exchange offering options on single events. Investors will be able to use the exchange to bet on or guard against events or indexes that do not have an underlying market, such as economic indicators, according to documents posted on the CFTC website.

The American Stock Exchange failed to police options trading, in violation of an order mandating stricter enforcement -- and then lied to regulators to cover up its lack of supervision, according to a report by Securities and Exchange Commission inspectors. The Amex, the third-biggest U.S.