Two long-awaited biotechnology stock option indexes -- theAMEX Biotechnology Stock Index and the CBOE Biotech Index --may finally be ready to make their market debuts at the end ofthe month, according to their sponsors.

The Chicago Board of Option Exchange (CBOE) expects to filetoday with the federal Securities and Exchange Commission(SEC) an amendment to its application for a biotechnology stockoption index. The American Stock Exchange (ASE), which filedlast January with the SEC to trade its own option index basedon an underlying collection of biotechnology stocks, saidTuesday that it too is ready to launch an index.

Investors could start trading in the competing biotechnologystock options as soon as Sept. 18 or 25, Richard DuFour, theCBOE's executive vice president, said Tuesday.

Both groups acknowledge that this is not the ideal time tolaunch a biotechnology stock index. The sector's stocks haveslumped, especially since a nearly across-the-board decline inbiotechnology stock prices last spring.

The index averages, which have been reported in BioWorld anda few other media since last winter, reflect that slump. Forexample, the CBOE Biotech Index, was around 170 when it wasproposed last October and peaked last January at 229.97. It hashovered between 130 and 160 since last April, closing Tuesdayat 136.62.

According to the CBOE's own calculations, its biotechnologyoption index could have more than doubled an investor'smoney (a 104 percent rate of return) in 1991. For the firsteight months of this year, the investor would have sustained anearly 36 percent loss. The comparable CBOE S&P 500 Indexwould have handed an investor a 26 percent gain in 1991, butless than a 2 percent loss so far this year.

"We have lost some of the momentum with the hang-up here(on the regulatory issue)," said Shelly Wolfe, an ASE spokesmanin New York.

Both index sponsors expect a lower volume of trading ofoptions this year compared to last. "We expect it to be similarto (other) industry-based indexes," said ASE's Wolfe. OtherAMEX industry indexes trade between 30 and 1,000 contractsdaily. Where CBOE and ASE officials once talked of hitting thehigh end of that spectrum, they spoke last July of tradingperhaps 500 per day.

Options provide a means to purchase a stock, or in this case anindex representing a collection of underlying stocks, at anagreed-upon strike price during a given number of futuremonths. They offer investors leverage, or the possibility ofreaping or losing at a multiple to the results they would receiveby buying a stock.

The CBOE expects the SEC's quick approval of its amendedapplication, following its decision to relax its insistence on thetiming of a settlement date when investors make good on theircontracts.

The settlement date will be handled at the stock markets'opening on the third Friday of every month. The CBOE hadwanted settlement based on the closing prices of the same day,which sparked opposition from, among others, the NationalAssociation of Securities Dealers (NASD).

"We've decided that at this point it's better to go this way thanit is to not have the product out there for investors," said theCBOE's DuFour.

NASD, which represents investment firms that make a marketin nearly all publicly held biotechnology stocks, told the SEC itwas concerned about the potential disruption to trading of theunderlying stocks and of the risks that its member companiesfaced with carrying required positions in such stocks over aweekend.

The AMEX Biotechnology Index sponsors said in July that theywould be willing to accept the morning close if it meant anearlier market debut for the indexes.


Both ASE and CBOE have made several roster changes in theunderlying stocks to their indexes since the indexes wereproposed last fall.

The CBOE Biotech Index now includes: Amgen Inc.,BioTechnology General Corp., Biogen Inc., Calgene Inc., CentocorInc., Chiron Corp., Cytogen Corp., Enzon Inc., Epitope Inc., GensiaPharmaceuticals Inc., Genzyme Corp., GreenwichPharmaceuticals Inc., Immune Response Corp., Immunex Corp.,Immunomedics Inc., Ivax Corp., Liposome Co., North AmericanVaccine Inc., Synergen Inc. and Xoma Corp.

The AMEX Biotechnology Stock Index now lists: Amgen, Biogen,Cambridge Biotech Corp., Centocor, Chiron, Cytogen Inc., Enzon,Gensia, Genzyme, Greenwich, Immunex, Liposome Co., SciosNova Inc., Synergen Inc. and Xoma Corp.

-- Ray Potter Senior Editor

(c) 1997 American Health Consultants. All rights reserved.