By TENNILLE
June 28, 2008; Page B5
As the stock market sank to lows for the year, options traders
couldn't help but seek companies that may be next in line for a beating.
In searching for potential victims, traders zeroed in on HSBC
Holdings PLC and International Business Machines Corp.
Trading in HSBC options jumped Friday to eight times the normal
daily volume. Investors picked up 70,000 puts, which let them sell the bank's
stock, and 11,000 calls that allow them to buy it, according to Trade Alert.
Traders took up bearish up positions and flocked to September
$75 puts, in particular, which were priced at $4.40 and make money if HSBC's
American depositary shares fall below $70.60 before Sept. 19. Such a move would
represent an 8% drop from Friday's close. The shares fell $1.39 to $76.55 as of
4 p.m. in New York Stock Exchange composite trading.
Although shares of the London bank have been more stable than
those of some of HSBC's
Option traders also appeared to be harboring concerns about IBM,
picking up 53,000 puts and 30,000 calls.
With IBM preparing to release earnings on July 17 -- just one day
before that month's options expire -- traders gravitated toward July $115 puts.
Priced at $1.85, those contracts make money if IBM shares fall below $113.15
before July 18. The shares fell $1.08 to $120.05 on the NYSE.
Options traders pounced on IBM just days after Research in
Motion Ltd. reported earnings and revenue that failed to meet Wall Street
expectations. RIM's stock dropped 13% after the news,
demonstrating how nervous investors are about the technology sector and the
economy at large, said Rebecca Engmann Darst, an analyst at Interactive Brokers.
"Clearly, the economy is very dyspeptic, and that is going
to bode very poorly for IBM," Ms. Darst said.