Options on Internet Index Netscape

Topic: Any Netscape Options? / The IIX: Internet Index

Dear Options Trading FAQ:

Might you expand on an issue raised in your previous response? What are your thoughts on when NSCP options might appear? Won't this be an absolute bonanza for brokers? I would think trading in NSCP options would be at an absolutely furious pace, given the high profile of the stock and its volatility.

Can't Wait for Netscape

Dear Waiting for Godot:

Well, you don't have to wait for Netscape options. How about looking into the Interactive Week Internet Index? Developed by the AMEX and Interactive Week Magazine, the index is designed to measure a selection of companies involved in providing digital interactive services, developing and marketing digital interactive software and manufacturing digital interactive hardware (This from the Contract Specifications sheet available at 1(800) THE AMEX). As you see from the list below, Netscape is indeed a component. Also keep in mind that this index is market capitalization weighted, that is, the Index value is based on the sum of the market value (i.e. share price x number of shares outstanding) of the components. That means that as NSCP grows in value, its effect on the Index grows as well.

List of 37 Components

3Com Corp
Acclaim Ent
Activision
Adobe Sys
America Online
Avid Tech Bolt
Beranek & Newman
Broadband Tech
Broderbund Software
C-Cube
Microsys
Cabletron Sys
Cisco Sys
Compression Labs
CUC International
Davidson & Assoc
Electronic Arts
FTP Software
H&R Block
Metricom
Microtouch Sys
Netcom Online Comm
NetManage
Netscape Comm
Newbridge Networks
Novell
NTN Comm
Optical Data Sys
Performance Sys
PictureTel Corp
Qualcomm
Sierra On-line
Silicon Graphics
Spectrum HoloByte
Spyglass
Stratacom
Sun Microsystems
UUNET Tech

Other bits to keep in mind: Expiration cycle of 3 consecutive near term months plus 2 additional further term months in the Jan cycle. LEAPS to be introduced. European style exercise. Cash settlement based on final settlement valuation symbol IIV. Margin for naked writers is 20% due to narrow based index makeup.

Definitely call the AMEX for further details on this index.

Sub-sector indices such as this one have historically not caught on particularly well. As a result, liquidity can be poor with the low volume. Witness the industry indices of the past such as the biotech, banking, oil etc. Indeed, some on the street use the introduction of such an index as a reverse indicator. The biotech index, for example, was brought out at the height of the biotech craze, only to crash with the inevitable cooling off of the sector. This one, however, may prove different as the rate of growth of the internet seems vastly greater than many realize. We will see.

As for NSCP options themselves, you won't have too much longer to wait. A fellow I spoke with at the CBOE says that investor requests for NSCP options have been coming in heavily. The exchange is working on the project.

Unofficially, he thinks within a couple of weeks maybe. And, yes, it will be a bonanza for the floor. Getting the specialist assignments for hot issues is a real windfall for the firms involved.

Note: The abovemention of equity and index options is NOT a solicitation to invest. Study up on new products before speculating.

Good luck and trade well! Remember, an educated options trader is the best options trader. Browse these books books on trading options.

Tags: Options Trading, Options Products, Index Options

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