Options Traders Not Ready to Jump Into Lucent

Just when you think Lucent (LU Quote - Cramer on LU - Stock Picks) couldn't possibly let down its shareholders any more, it does.

Volatility Index
Close Today	% Change
28.93	-4.62
Source: ILX

For years that wasn't the case. It used to be that Lucent seemingly could do no wrong and didn't disappoint investors; now it can't do anything right.

The firm revealed Tuesday that it had "identified a revenue recognition issue," thus trimming $125 million of revenue in its fiscal fourth quarter ended Sept. 30 and said it couldn't confirm its earnings and revenue guidance for the first quarter of 2001. And as stock traders showed no remorse in driving Lucent shares down, options traders seemed to be more than happy to join in. Lucent tumbled $3, or 14%, to $17.94 after trading down to a 52-week intraday low, kissing the $17.56 level.

Put/Call Ratio
Close Today	Previous Close
0.56	0.72
Source: ILX

The December 20 calls on Lucent were active, with 2,190 contracts trading on the American Stock Exchange. The calls were off 1 1/2 ($150) to 11/16 ($68.75).

Floor traders in Chicago said Lucent call volume was being driven by both the bottom-fishers and the bloodthirsty.

Because Lucent is such a widely held stock, investors who own shares are likely selling those calls against the chance that Lucent will see any strength by the Dec. 15 options expiration. It allows them to take in some premium to offset losses in the underlying stock.

Call sellers would be hoping the options will expire worthless, in this case, below the 20 strike price, and they will be able to keep the premium for selling the call.

The brave souls willing to buy call options are trying to call a bottom on a stock that has had several bottoms in the past year.

The prices of Lucent options increased modestly Tuesday from closing levels Monday, according to Paul Foster of 1010WallStreet.com in Chicago.

The volume in the options was mixed, Foster said. Foster, who's long a little bit of Lucent stock, said he was surprised that there wasn't more volume in the options, saying that "people are tired of" Lucent.

As for Lucent 17 1/2 options, more puts were trading than calls, with a total of nearly 1,700 of the contracts trading, showing a decidedly bearish tilt to the action. On the Amex, the 17 1/2 puts were up 13/16 ($81.25) to 1 5/16 ($131.25).

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Volume in Barnes & Noble (BKS Quote - Cramer on BKS - Stock Picks) options mellowed after exploding Monday.

Even yesterday with the spike in volume, the prices of the options didn't budge much. On Tuesday, The Wall Street Journal reported that Barnes & Noble and Gemstar-TV Guide International (GMST Quote - Cramer on GMST - Stock Picks) have held talks recently about getting together. The report, citing people familiar with the matter, said that a deal isn't imminent and that a hook up between the companies was a long shot.

Volume in Barnes & Noble options Monday was abnormally heavy, some options market analysts said. Shares of Barnes & Noble have had a heck of a run lately. On Nov. 10, the stock closed at $17.75. Tuesday morning, the stock was giving back some of its recent advance, down 75 cents to $26.50.

Volume in Barnes & Noble options Monday totaled 2,557, according to McMillan Analysis. Of that total, 1,889 of the options traded were calls.

Foster, however, while pointing out that the volume Monday was notable, said the price movement on the options -- a key signal about demand -- weren't "saying anything."

Volume in the options was light Tuesday, with the heaviest-traded contract the December 30 puts, with volume of 71 contracts.

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Bear Stearns (BSC Quote - Cramer on BSC - Stock Picks) announced Monday that it is acquiring the Helios Group, a futures and options trading firm that specializes in electronic exchange-traded derivatives.

According to Helios' Web site, the Chicago-based firm has a presence on the Chicago Board Options Exchange and the firm is listed as a competitive market maker on the International Securities Exchange, the all-electronic U.S. options exchange.

Terms of the acquisition weren't disclosed.

Helios trades futures and options on individual equities, equity indices and fixed income instruments on 11 exchanges. In addition to Chicago, the firm has offices in London and Amsterdam.