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by 11/6/2000 9:30 AM
Stocks quoted in this article:
On October 26, consumer foods concern Kellogg (K – 26-9/16) agreed to acquire Keebler Foods (KBL – 40-9/16) for the sum of $42 a share. The deal is expected to close in the first quarter of 2001. Since the news, KBL shares have been trading in a narrow range just shy of the acquisition price.

It appears that an options speculator may be attempting to profit by selling out-of-the-money puts on KBL. In Friday's, trading the February 35 put was notably active. Altogether, over 6,200 contracts changed hands on the option, with over 6,000 contracts translating into new open interest. Most of the volume crossed the tape at the bid price, increasing the likelihood that these positions were entered as put writes. If the shares remain above 35 at February expiration (February 16), these options will expire worthless, allowing the trader to pocket the entire premium. <

by 11/3/2000 3:29 PM
Stocks quoted in this article:
Aether Systems (AETH - 106-7/8) provides wireless data services. The company was one of the more successful initial public offerings of 1999. From its initial price of 16, the stock soared to a peak of 345. A reversal of fortune has the shares trading below their intermediate-term 10-week moving average, a trendline not breached on a closing basis since late July.

With the shares traveling through quite a broad range of prices, there are currently many option strikes open (so many as to require three options roots). Despite the variety, there are only about 10,500 current open option positions for options with up to three month until expiration. With the shares up about 18 percent in today's market, we are noticing a pickup in volume on the out-of-the-money November 100 put (1,528 contracts) and the in-the-money November 110 put (1,401 contracts). Compared to current open interest of 236 and 86 contracts, respectively, these volumes should translate into new positions.

Schaeffer's put/call open interest ratio (SOIR) for AETH has been flirting with levels that indicate extreme optimism. Today's activity may aid in reversing that trend.

by 11/3/2000 3:04 PM
Stocks quoted in this article:
This morning, the Commerce Department released the September results for U.S. factory orders. Demand for U.S. manufactured goods remained strong in September, as new orders rose by 1.6 percent, a slight drop from August's 2.0-percent advance. Durable goods orders increased by 3.0 percent due to heavy demand for aircraft and automobiles. In the August reporting period, durable goods registered a 2.9-percent advance.<

by 11/3/2000 1:47 PM
Stocks quoted in this article:
PALM (PALM - 62-15/16) is up over six percent today, as it continues its relative-strength outperformance of the NASDAQ Composite (COMP - 3442.0). The shares have moved above the 61 level, which acted as resistance throughout October.

The most-active November PALM option today is the out-of-the-money 70 call, which has seen 1,823 contracts change hands. Open interest at this call strike is currently 11,717. Surprisingly, the heavist open interest in the November series is at the November 50 put, with over 18,000 contracts in residence. PALM will be added to the Nasdaq-100 Index (NDX - 3325.74) this coming Monday, November 6.

by 11/3/2000 10:45 AM
Stocks quoted in this article:
We bring the following discussion up as it is highly pertinent to the bottom line of many U.S. corporations. You no doubt have heard about the negative impact of the weak euro (relative to the dollar) on corporate earnings numbers released over the past several weeks. This double-edged sword swings in both directions, however. As world economies were emerging from the depths of the 1998 markets, the U.S. government was determined to maintain a strong dollar, which was considered necessary to stave off inflationary pressures within our system (that was before the Fed started its intervention cycle).

The dollar continues to maintain its strength, especially compared to the infant euro currency. The weakness in the euro places a bottom-line burden on U.S. corporations from two facets. First, goods sold in the 11 euro-zone countries are paid for in the local currency. When they are deposited back overseas and exchanged to the U.S. dollar, some of the value dissipates in the exchange rates. Second, a strong dollar makes U.S. products more expensive in these regions. As a result, the competitive edge is diminished and sales shrink.

As mentioned in our "Before The Bell Section" today, the European Central Bank (ECB) intervened in currency markets to buy euros in a unilateral move that immediately lifted the region's currency. It is only the second time the central bank has acted on behalf of the euro. The ECB, which decides monetary policy in the 11 euro-nations, last intervened on September 22, coordinating with the U.S. Federal Reserve, the Bank of Japan, and other central banks.

The euro immediately rallied on the news to 0.8797 euros to the dollar before giving up most of those gains and falling back to hover just above 0.87. The European currency first broke below potential support at 0.89 in late August and has drifted lower ever since.

When a central bank shows itself willing to intervene in currency markets and buy , money traders are less willing to sell that currency for fear of being caught empty-handed if demand for that currency suddenly emerges. <

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