Options in Motion: Guidant

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Drug stocks stood out in a thinly traded options market Tuesday.

While most traders remained on vacation, a stock that did get attention was Guidant(GDT). The medical device maker said it expects to earn 17 cents to 23 cents a share on revenue of $790 million to $820 million for the fourth quarter, which is below Wall Street's forecast of 49 cents a share on sales of $928.4 million.

Since the company is in the middle of a takeover battle between Johnson & Johnson(JNJ) and Boston Scientific(BSX), most of the activity was taking place in the January 2006 options. The 55 puts traded 12,900 times and were up 25 cents to 45 cents. The 60 puts traded 7,800 times and were up 30 cents to 80 cents. Judging by the recent action in the puts, it looks as though some traders might be anticipating the deals might fall through. Shares of Guidant were down $2.19, or 3.27%, to $64.79.

Bristol-Myers(BMY) options saw activity after the Food and Drug Administration approved its rheumatoid arthritis drug Orencia. The January 2006 25 calls, currently trading for 5 cents, traded 4,000 times. The January 22.5 puts traded 10,000 times and were up 5 cents to 30 cents. The stock was up 6 cents to $23

Elsewhere, biopharmaceutical company Neopharm(NEOL) had bullish activity after an independent committee that reviewed its brain cancer drug said the trial may continue as planned.

The January 2006 12.5 calls traded 12,400 times, which is more than the open interest. Traders who were long the calls might have sold them into the stock's strength. The January 10 puts traded 5,800 times and were down $1.95 to 30 cents. The stock was up $3.61, or 45.41%, to $11.56.

One tech stock that caught traders' attention was Sirius Satellite(SIRI). The company announced that it has passed 3 million subscribers and expects a strong year-end. The January 2006 7.5 calls traded 3,600 times and were unchanged at 20 cents. Traders might be expecting the stock to make a run to $7.50 heading into to January's expiration on the 20th. Also, the February 8 calls traded 4,200 times which is double the open interest. Sirius shares were higher by 18 cents, or 2.71%, to $7.02.