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Becton, Dickinson and Company Message Board

  • StckMrktExprt StckMrktExprt Mar 9, 1999 5:39 PM Flag

    Abbott Take Over 3

    I dont think the rumors are true as from the
    looks of it, Abbott, cant do a hostile take over and
    the current management wants to stay independent as
    most thinks, BD is better off being independent. Any
    comments are welcome.

    • Thanks for going to the time and trouble of
      explaining the options volitility.I for one do care about
      this and find it an interesting way to get an
      indication of "other than normal" interest in the company.It
      would seem that options trading is the first place
      anyone with inside information would go to make a
      killing off what others are not privy to. Of course, this
      would also be the arena of traders who buy or sell on
      rumors. I have printed out both your posts - they are
      keepers. Thanks again.

    • I COULDN'T READ THE WHOLE THING.....But I'm sure
      you know what your saying, and you took the time to
      do it, Us old guys will wait for the condensed
      version....Thank You.......

      The Horse is Alive and well,
      and Visiting Jones Beach......

    • Okay, we are almost done. Now to the explanation
      of what is meant by statements like "the implied
      volatility jumped to 63 today". Pretend that the calculation
      of the value of an option is a machine...you throw
      in the stock price, the interest rate, the days to
      expiration, the amounts of the dividends, and the expected
      volatility of the stock, and the machine spits out the value
      of the option based on these things you threw in.
      Let's say, for example, we throw all of that stuff in,
      and the machine tells us that the value of the option
      we are looking at is $4.25 (which means
      $425/contract). But, when we look at the marketplace, we see that
      the option is trading at $5.25 ($525 per contract).
      We might ask ourselves WHY??? well, to figure this
      out, we can do the equation a little backwards... this
      time, we will throw the option price into the machine,
      and solve for the volatility. This basically says
      this..."the marketplace is valuing these options at $525, but
      I only think they are worth $425. Since the other
      variables are all known, the only variable that is really
      unknown is the volatility. Thus, what volatility does a
      value of $525 represent?" . This is called the "implied
      volatility"--- plugging in the price, and solving for the
      volatility. The price of the option IMPLIES a certain
      volatility.
      Again, the only reason that someone would buy these
      options at $525, is if they expected the volatility, or
      average percent change per day to be higher than what you
      expected when you calculated the value and got $425.
      Whenever more and more people suddenly start paying higher
      and higher prices (and thus higher and higher IMPLIED
      volatilities) for the options, you have to sit back and
      evaluate why they would be doing this. A sudden dramatic
      rise in the volatility usually, in my experience, has
      meant that thes buyers of options have material
      information that the rest of the world does not yet have.
      They buy the options, either calls or puts depending
      on whether the news is good or bad, and they will
      then call their family and friends and tell them the
      secret, and they will go out and buy the calls and puts,
      and then, they will tell their family and friends and
      so on and so on. The only clue to this type of
      activity, is the unusual activity in the options of the
      company. That is EXACTLY what has been happening in the
      options on BDX over the last few days. BDX has traded at
      approximately a 40 volatility for a very long time, fluctuating
      between 36 and 44 except for the times of big market
      moves as in last Fall. However, this week, lots of
      options traded, and the prices that they traded at
      implied 63 or even higher volatility. The people who
      initiated the trades were buying calls (bullish) and/or
      selling puts (also bullish). The volume came in, at first
      slowly, and then got faster and faster as the week went
      on. Look at Friday's stock volume of 1.7 million
      shares. Go to www.PHLX.com to see the option volume for
      Friday. IT SMELLS TO ME LIKE THERE IS GOING TO BE SOME
      TYPE OF GOOD NEWS COMING OUT IN THIS STOCK VERY SOON.
      I guess we'll just have to wait and see.
      Good
      luck to all, hope I haven't beaten this dead horse too
      much!!!
      JM

    • This message is for those of you who don't
      understand the meaning of volatility when it comes to
      options trading. I hope I don't confuse or bore any of
      you. Here goes...
      The term, Volatility, means
      exactly what you think, it means movement. When you look
      at a stock like Dell Computers,or Yahoo, or
      Amazon..., you will see a wildly swinging stock price. When
      you look at the stock price of your favorite Utility
      Company, like Philadelphia Electric, you see a much calmer
      graph of the stock price. Thus, it can be said that
      Dell is more volatile than Phila. Electric. Well then,
      how much more volatile is one stack than another. The
      way the Mathmeticians figured it out was to do some
      type of Statistical analysis of the marketplace, and
      they measured the Standard Deviation of the stock
      price in order to measure the relative volatilities of
      stocks (See articles by Fisher Black, or Black-Scholes,
      or Cox-Ross, or Cox-Rubenstein). I am no
      mathmetician, but basically, the theory says this; A stock that
      moves 1 % on average, (Hi-Lo difference for the day)is
      said to have a "16 Volatility". This has something to
      do with the fact that there are approximately 256
      trading days in a year, and the square root of 256 is 16.
      As I said, I am not great on the derivation of these
      formulas, I just know how to use the tools that the
      calculation gives me. Thus, a $50 stock that moves, on
      average, 1 1/2 points per day, would have a 48 volatility
      (1 1/2 points= 3% and 3 times 16 = 48). A $100 stock
      that moved 1 1/2 points per day would have a 24
      volatility (1 1/2 points = 1 1/2 % and 1 1/2 times 16 = 24).
      Hopefully, you now understand that part of it.
      Anyway,
      options have a value because they allow you to put up a
      smaller amount of money (less risk), and still bet on the
      direction of a stock. If you think about it, the more
      volatile a stock is, the more the option on that stock
      should be worth. For example, if we take STOCK A, a $50
      stock that moves 1% per day (16 vol),versus STOCK B, a
      $50 stock that moves 3% per day (48 vol), the 90 day
      option to buy STOCK A at $60 per share would be worth
      much less than the 90 day option to buy STOCK B at $60
      per share, since STOCK B has a much greater chance of
      going above $60 per share between now and expiration,
      thus, the higher the volatility, the more the option is
      is worth. So far, so good!!

      Without going
      into the details, the equation that figures the values
      of options takes the following variables, and ONLY
      these variables, into account. They are:
      1. Stock
      price
      2. Days until expiration
      3. Interest Rates on
      Treasuries (risk free rate)
      4. Dividends on the stock
      between now and expiration
      5. Volatility of the
      stock

      If you look at these variables, you can see that on
      any given day, most of them don't actually vary very
      much. Days to expiration is a known value, Dividends,
      while not 100% sure, are pretty much steady over the
      life of the option, Interest rates do vary, but not by
      much,... the only real variables are the current price of
      the stock (which we know), and how volatile the stock
      is going to be over the life of the option.
      Predicting this volatility is similar to predicting which
      way the stock will go over the next 90 days. However,
      stocks, like people, seem to have "personalities", and
      the volatility of a given stock changes, but usually
      not dramatically, over any 90 day period. For
      example, the volatility may vary between 38 and 44 over a
      90 day period, but not much more than that. This
      "rule" of volatilities changing slowly often gets
      violated, however. Things like the crash of '87, or even
      the dramatic selloff in the market we had this past
      Fall, can cause the stocks volatility to jump to much
      higher levels very quickly.

      I have to stop here
      and will continue in Part 2.

    • pursuing.

      Sorry - after I read my message, I quickly realized how rumors start (and snowball).

    • are so fat that they don't fit into my mouse
      trap. Where do I buy this new product so I can catch
      these mice?

      I heard on a business radio show
      Friday pm that ABT was actively pursuing either BDX or
      another company (which I forget the name of). They were
      stressing that BDX was the prime target.

      I don't
      own BDX and I'm 100% invested already so I may miss
      this move altogether. But I do have the web address
      (off the radio) and I may take a free trial
      subscription to their service if this one pans
      out.

      Good Luck BDX Longs

    • I posted a reply to you three hours ago, but
      haven't seen it on the board yet, so here goes
      again.


      At least part of the options activity may be related
      to BDX being mentioned on CNBC last Wednesday. They
      were mentioned , along with Hoffman-LaRoche, as one of
      the business partners of Millenium Pharmaceuticals.
      Millenium's stock soared that day because of the discovery of
      a gene that prevents obesity in mice. The little
      critters with the weird genes were stuffed with fat foods
      and didn't gain any weight. The control group with
      normal genes were fed the same foods and blew up like
      blimps. There was no mention of how BDX would profit from
      this finding, but if you read the Yahoo news on BDX of
      Feb 22, there is an article that could shed some
      light.


      In short - bad word, sorry - BDX is
      getting a ripple effect from Millenium. I am not saying
      that this is the only reason for the stock price rise
      or the options action of the past few days, but it
      could be a contributor.


      Also noted today on
      the BDX news board that the inherent volitility of
      certain BDX options jumped to 63% from 43%. I am not
      familiar enough with options to know what that means. It
      is time to undergo the agony of learning. Can you
      explain inherent volitility? How is it calculated? Does
      it affect stock price activity or volatility? How do
      options traders use this volitility figure to their
      advantage.

    • but there is going to be a fall on the price of this stock!!!

    • Thanks for the information, or lack thereof! I
      have been trading this stock for years, and I too am
      aware of the neveer ending rumor about ABT. However,
      have you looked at the activity in the options over
      the last few days? Today, how about the action of the
      stock, with 1.7 million shares and the stock trading as
      high as 40 1/16!Something is out there, and it may
      only be a rumor, but there are very large buyers of
      calls, and they are paying ridiculous prices for them.
      The last time I saw anything similar to this in this
      stock was back in early January, when the stock was in
      the low 40's, and there were huge buyers of puts at
      ridiculously high prices (look for my posts back then). A few
      days later, analysts downgraded the stock, and it was
      indicated as low as 28, but opened in the low 30's. What I
      am saying is that people don't make these types of
      bets without having some type of information that
      isn't available to the public. They know, or think they
      know, something that the rest of us don't, and are
      willing to put their money up! That is not something to
      take lightly! Look at the trading in MII in the last
      week of January, the same type of buying was occuring,
      and if you look at the message board at that timefor
      MII, you will see that I posted the information about
      the unusual options activity before ROH came in and
      took MII over. I don't know what's up, but I have been
      unable to get in touch with anyone at the company (Ron
      Jasper, stockholder relations, is traveling, and won't be
      back to work until next Thursday). I left a message
      with Mr. Jasper's office, and Eric somebody was
      supposed to get back to me, but has not, as of yet, called
      me. I guess we'll just have to wait until Monday
      since most of these takeovers seem to occur over the
      weekend. Good luck to all.
      JM

    • The ABT takeover rumor has been around for
      awhile. However, what about Bayer A.G.? Bayer was rumored
      to be a potential buyer some time ago.
      Maybe BDX
      should talk to Dupont. They were looking for a partner
      for their pharmaceuticals business. Maybe DuPont
      would be interested in a drug delivery, diagnostic
      partnership? I do not believe that BDX is interested in Drugs!

    • View More Messages
 
BDX
117.17+0.69(+0.59%)Aug 29 4:01 PMEDT

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