Little Sense of Impending Doom on Lucent Message Boards, Options Pits

Lucent's (LU Quote) Thursday afternoon earnings warning remained largely under wraps ahead of the company's announcement, though late in trading there were a few whiffs of blood in the options markets and on one Internet bulletin board.

Just after the close, the company said first-quarter earnings would fall far short of analysts' expectations. The stock, which was halted late in the afternoon, dropped 3 5/16, or 4.6%, to 69 1/16 during the trading day before slipping an additional 17 to 52 1/16 in postmarket trading, in extraordinarily heavy volume of 6 million shares, according to Instinet.

Whispering about Lucent's bombshell was limited to a single Internet message board. Some two hours before Lucent made its announcement, a posting to a board dedicated to discussion of Lucent featured a comment that the company could miss earnings.

"LU is rumored to have bad earnings. LU will not even come close. Get will [sic] you can," a Dr. Heskel posted at 2:17 p.m. EST on the Raging Bull Lucent board. Dr. Heskel didn't respond to a request for comment.

But similar chatter about Lucent didn't turn up on the company's message boards on Yahoo! or SiliconInvestor.

There was some sniffing around going on in the options markets as well. Buyers of January 65 puts looked like they were wagering the stock would fall even further.

More than 2,700 of the out-of-the-money January 65 puts traded and the price of the contract ratcheted up 11/16 ($68.75) to 1 3/4 ($175) by the close of trading Thursday. The January 70 puts were also active, trading more than 2,700 contracts. Out-of-the-money puts are often used to speculate on downward pressure on a stock, and aggressive buying of them in the market often can signal bad news.

The value of those put options will increase if Lucent's price continues to fall.

With the overall weakness among tech stocks, there had been some heavy traffic in Lucent options even before today's sessions. According to the Pacific Exchange market maker in the Lucent options, "there were buyers of options in the past few days and at the end of last week," said one resigned Lucent options trader at the post.

Another trader on the Philadelphia exchange said that trading was "nothing suspicious" in terms of volatility in the options, adding: "For once, it looks like somebody knew something, but it didn't leak into the market."