Investors Buy Puts on Tyson Foods
And the Russell 2000 Index ETF
By MOHAMMED HADI
February 23, 2006
Wall Street Journal
Owners of Tyson Foods Inc. shares have had a lot to worry about lately.
This includes weakness in the company's beef business, slumping international poultry sales and the combined impact of mad-cow disease and bird flu on business in the U.S. and abroad.
In a nutshell: Disappointing quarterly earnings and a hazy outlook have knocked the stock down about 23% in about three months.
Yesterday, options traders gave every indication that they think things could get worse.
Trading in puts on Tyson was remarkably heavy, even by recent standards, with the focus of activity in the April 12.50 puts. These traded 15,190 contracts, where 7,786 were previously outstanding, and rose 20 cents, to 35 cents, on the International Securities Exchange. This as the stock slipped 13 cents to $14.21.
"Today's put volume is the biggest option volume we have seen going back at least one year," said Stacey Briere, options strategist at Susquehanna Financial Group, "and investors are buying the majority once again."
The trading followed comments made late Tuesday in which the company's chief executive, John Tyson, told the Consumer Analysts Group of New York that the current quarter is "the toughest one I've seen."
Yesterday morning, Wachovia Securities analyst Jonathan Feeney downgraded his rating on the stock to underperform, citing "deteriorating earnings visibility."
All told, more than 21,500 puts on Tyson traded Wednesday. Implied volatility in short-term options jumped to 32% from 29%, according to Track Data. By comparison, on a typical day in January, about 2,600 puts changed hands.
Meanwhile, with the Russell 2000 small-stock index returning to within striking distance of its all time high, puts on iShares Russell 2000 Index Fund traded more heavily than usual.
With the exchange-traded fund up $0.49 at $72.82 -- just below a record closing high of $73.10 -- trading was heaviest in the March 70 puts, but the April 70 puts also traded busily.
About 19,415 of these changed hands compared with 5,580 previously outstanding, and they fell 50 cents, to 85 cents, on the Chicago Board Options Exchange.
All told, more than 155,000 puts on the ETF changed hands Wednesday.
The popularity of options on the Russell 2000 Index Fund shouldn't come as much of a surprise given Russell Investment Group's announcement last week that $3.8 trillion in assets are now benchmarked against its stock indexes -- including the broad Russell 3000, the large-cap Russell 1000, and the best known small-cap Russell 2000.
wsj.com
And the Russell 2000 Index ETF
By MOHAMMED HADI
February 23, 2006
Wall Street Journal
Owners of Tyson Foods Inc. shares have had a lot to worry about lately.
This includes weakness in the company's beef business, slumping international poultry sales and the combined impact of mad-cow disease and bird flu on business in the U.S. and abroad.
In a nutshell: Disappointing quarterly earnings and a hazy outlook have knocked the stock down about 23% in about three months.
Yesterday, options traders gave every indication that they think things could get worse.
Trading in puts on Tyson was remarkably heavy, even by recent standards, with the focus of activity in the April 12.50 puts. These traded 15,190 contracts, where 7,786 were previously outstanding, and rose 20 cents, to 35 cents, on the International Securities Exchange. This as the stock slipped 13 cents to $14.21.
"Today's put volume is the biggest option volume we have seen going back at least one year," said Stacey Briere, options strategist at Susquehanna Financial Group, "and investors are buying the majority once again."
The trading followed comments made late Tuesday in which the company's chief executive, John Tyson, told the Consumer Analysts Group of New York that the current quarter is "the toughest one I've seen."
Yesterday morning, Wachovia Securities analyst Jonathan Feeney downgraded his rating on the stock to underperform, citing "deteriorating earnings visibility."
All told, more than 21,500 puts on Tyson traded Wednesday. Implied volatility in short-term options jumped to 32% from 29%, according to Track Data. By comparison, on a typical day in January, about 2,600 puts changed hands.
Meanwhile, with the Russell 2000 small-stock index returning to within striking distance of its all time high, puts on iShares Russell 2000 Index Fund traded more heavily than usual.
With the exchange-traded fund up $0.49 at $72.82 -- just below a record closing high of $73.10 -- trading was heaviest in the March 70 puts, but the April 70 puts also traded busily.
About 19,415 of these changed hands compared with 5,580 previously outstanding, and they fell 50 cents, to 85 cents, on the Chicago Board Options Exchange.
All told, more than 155,000 puts on the ETF changed hands Wednesday.
The popularity of options on the Russell 2000 Index Fund shouldn't come as much of a surprise given Russell Investment Group's announcement last week that $3.8 trillion in assets are now benchmarked against its stock indexes -- including the broad Russell 3000, the large-cap Russell 1000, and the best known small-cap Russell 2000.
wsj.com