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A Hard Day for the Mr. Softee Crowd

SAN FRANCISCO -- By 10 a.m. on the

Pacific Exchange

options floor, traders were settling into their lunches, the smell of lunchtime pizza creeping into the


(MSFT) - Get Microsoft Corporation (MSFT) Report

crowd as traders kept up a heavy pace of trading in the Goliath of the tech industry. (Yeah, these guys get up at 4 a.m., so pizza or takeout Chinese at 10 a.m. qualifies as lunch.)

With the


wavering but not giving in to selling pressure and


stocks including Mr. Softee and perennial strongman


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among the casualties, put buyers were out in force and they kept traders on their toes for the second straight day.

"There are big buyers of puts on Microsoft today," said Allan Leong, the pit representative for the Microsoft crowd at the P-Coast when the firm was trading down 4.

While most of the floor was enjoying a relatively low-key day at the exchange, there was some nail-biting and hoping against another significant downdraft because many traders were still "front-spread" in their positions as a result of selling puts and vulnerable to a swift fall.

"The floor is still pretty front-spread," Leong cracked as he surveyed the situation in the crowd, still the only place anyone can access Microsoft options.

A few feet away in a smaller trading crowd where



and a handful of oil services stocks trade, Craig Resnick said he was seeing spread trades with order to buy puts and sell calls coming in as investors sought to defray the cost of buying protection that has grown increasingly expensive.

"There's been a lot of carnage in the underlying stocks and all through it people have been selling calls and buying puts. They're still doing that," he said.

Traders pushed volume on Microsoft's out-of-the-money September 100 puts to more than 5,200 contracts as the contract's price was jacked 1 ($100) to 1 5/16 on the day. Much of that action came as the company was dawdling at the day's low of just under 105, before closing at 105 1/2, down more than 4. Traders watched Microsoft closely because the company is not among the more volatile stocks in the market and typically trades in a 4 range, Leong said. If that changes, floor traders may find themselves dangerously exposed, especially in the wake of the put buying today.

Leong, who also trades



and some other smaller stocks in a separate pit at the P-Coast, said he was seeing put buying picking up in the Internet stocks but that the plays were absent the optimism that has carried these stocks to astronomical levels. "What we're not seeing is the out-of-the-money call-buying that we saw earlier this year," he said, an indication that traders weren't expecting the sector to bounce back quickly from its recent malaise.