IntercontinentalExchange (ICE) raises the stakes as it placed a competing $9.9 Billion bid for the Chicago Board of Trade (BOT). The Chicago Mercantile Exchange (CME) had been talking of a merger since last October. The CME was prepared to pay $8.96 billion for CBOT.
Audio Podcast:
An audio podcast of this article is available at: poweropt.com/podcasts/2007_03_16_CBOT.mp3
It was reported last week the CME/CBOT merger was expected to be finalized by mid-year. The timing of ICE’s bid comes in the words of analysts, “Just as the train is about to leave the station.”
CNBC interviewed the CEO of IntercontinentalExchange at a Boca Raton, Florida conference where the potential deal was announced. “Together ICE and the CBOT would create one of the world’s leading derivative exchanges. And that’s the excitement for entering the process now. We think together our exchange will be the most valuable in the space,” Jeffrey Sprecher, Intercontinental Exchange Chairman and CEO said in the interview.
The bid was “definitely a surprise. I don’t think it was something our industry was expecting. Nor was the CBOT.” Interestingly, the CNBC commentator noted in the interview Mr. Sprecher is about to close on a house in Chicago. Which, in some ways, may be the most telling sign of the CBOT’s intention to accept the offer. “Well I do guarantee that I’ll be living in Chicago, but beyond that, we’ve promised a package of things that is similar to what the CME has proposed and we believe that since that was acceptable to the broad customer and shareholder base that those should be the kinds of things that they’ll be looking for from us.”
Potential Trades:
All of the following option trades have 36 days until expiration. CME is currently trading at $532.88, CBOT is currently trading at $194.95 and ICE is currently trading at $128.10. These trades were discovered using the powerful suite of option search tools found at PowerOptions.
| PowerOptions covered call search (36 days) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Sym |
Stock Price |
OPTION | Strike Info |
Opt Bid |
% Dnsd. Prot. |
% If Unch. |
% If Asgnd |
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| CME | $532.88 | CNMDH | 07 APR $540.00 | $18.40 | 3.50% | 3.60% | 5.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BOT | $194.95 | BOTDQ | 07 APR $185.00 | $14.70 | 7.50% | 2.60% | 2.60% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ICE | $128.10 | ICEDU | 07 APR $125.00 | $9.80 | 7.70% | 5.70% | 5.70% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ICE | $128.10 | ICEDV | 07 APR $130.00 | $7.50 | 5.90% | 6.20% | 7.80% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ICE | $128.10 | ICEDW | 07 APR $135.00 | $5.40 | 4.20% | 4.40% | 10.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The listed covered call options offer an array of downside protection between 3.5 and 7.7% and offer potential profits ranging from 2.6 to 10%. All of the trades listed above will require around $10,000 to $50,000 to enter the position.
A riskier, but somewhat less capital intensive, alternative is a bull call debit spread. For example, a bull call debit spread may require less than a $1,000 in capital to enter a similar position as those described above. If you wish, you can research other possible trades with the suite of tools found at PowerOptions.
Competitors:
Competitors for CME include: CBOT Holdings Inc. (BOT), Deutsche Börse AG (private), LIFFE (Holdings) plc (private), and Nasdaq Stock Market Inc. (NDAQ).
Competitors for BOT include: Chicago Mercantile Exchange Holdings Inc. (CME), NYMEX Holdings Inc. (NMX), and Chicago Board Options Exchange Incorporated (private).
Competitors for ICE include: NYMEX Holdings Inc. (NMX), Bloomberg L.P. (private), and ICAP plc (private).
For more information about how to identify and research great option trades, visit the PowerOptions website. There you will find the data you need to make quick, clear, and informed decisions. You can trade knowing you have found the best investment. Also, PowerOptions will allow you, with a few quick clicks, to quickly and accurately compare trades. PowerOptions‘ premium customer support is second to none in the industry. They can be easily contacted when you need them at their toll-free number to answer customer questions. Call them now toll free at 877-992-7971.
PowerOptions provides a free 14-day trial of its service. So join PowerOptions today, and you too can start reaping the benefits of the covered call investment strategy.
PowerOptions‘ sister company PowerOptionsApplied provides expert stock option trading recommendations. PowerOptionsApplied specializes in covered calls, naked puts and iron condor stock options strategy recommendations. PowerOptionsApplied provides a 30-day risk free trial of its service.
[tags] CNBC, Boca Raton, Florida, Jeffrey Sprecher, Chicago, Deutsche Börse AG, LIFFE (Holdings) plc, Chicago Board Options Exchange Incorporated, Bloomberg L.P., ICAP plc, BOT, CBOT Holdings Inc., CME, Chicago Merc. Exch. Hldgs. Inc., ICE, Intercontinental Exchange Inc., NDAQ, Nasdaq Stock Market Inc., NMX, NYMEX Holdings Inc., covered call investment strategy, covered call options, investment strategy, iron condor, poweroptions, stock option trading, stock options [/tags]