Is it too late to play

AT&T

(T) - Get Report

in the options market?

AT&T and

Comcast

(CMCSA) - Get Report

finagled a deal that would allow AT&T to prevail in the tug-of-war over

MediaOne Group

(UMG)

.

Although AT&T gets MediaOne, Comcast doesn't walk away empty-handed; after AT&T buys MediaOne, the combined company will sell Comcast strategic cable systems, with up to two million subscribers, for about $9 billion.

Because the best options plays typically come before such news is public, conventional wisdom tells us it's too late to make a move.

Kyle Rosen, president of newly-launched hedge fund and management firm

Rosen Capital Management

, disagrees.

He was busy updating his AT&T options positions and has been selling puts on AT&T that "enabled me to participate in a bull move, and not get frustrated if AT&T stock stayed dead money. Before yesterday, AT&T could have stayed at 50 or 45 for a year before the company absorbs the debt. But people are willing to look past that now," he says. "AT&T is an Internet play. This is not just a phone company."

Well, just say the word and watch it go: AT&T stock vaulted up 5 1/4 to 62 3/16 by mid-session.

Rosen outlines how he justifies taking a post-news position. "AT&T over the year could go to 100. So, you may have missed the first 10% or 20% gain, but want to take a conservative posture." For example, Rosen said he'd be selling six- to 12-month put options with a strike price of 50 or 55.

"Let's take some hypotheticals: if you sell some January 2000 53 3/8 put options, today going for about 3 1/2 ($350), you don't lose money unless the stock falls below 50. If it does, which is unlikely, you own AT&T at 50. It's now over 62. Chances are you make money, and that's a 50% return in 8 months. Otherwise, you own AT&T at a phenomenal price."

The options market was agreeing with Rosen today as bulls sent volume on the out-of-the-money May 65 calls to more than 4,500, well above the slim 960-contract open interest. The price of the contract spiked 7/16 ($43.75) to 3/4 ($75) enough to bring buyer-writers and calls sellers into the action later in the session.

Options investors also were sniffing around

Cabletron Systems

(CS) - Get Report

call options, which appeared to jump in sympathy with the cable sector. The stock was up as much as 1 11/16 to 10 3/4 as the market digested day two of the AT&T-MediaOne-Comcast deal. Cabletron stock shot up 1 1/2 to 10 9/16.

"It's probably just a matter of time until Cabletron is in play," Rosen added. "The question becomes really not if, but when? Most of these cable guys will be swallowed up." (He doesn't hold a position in Cabletron Systems options). Cabletron May 10 and June 10 calls were up 11/16 ($68.75) to 1 1/4 ($125) and 1 1/16 ($106.25) to 1 13/16 ($181.25) respectively.

Trading volumes were roughly 2,800 and 1,700 contracts, compared with open interest of 5,475 and 3,809.

Raise your hand if you're sick of the

Republic New York

(RNB)

takeover rumor.

"If the takeout price was 60 to 65 a share, and it's been climbing since the low 40s, why hasn't it happened yet?" asked one Philadelphia-based floor trader. Republic New York stock gained 3/4 on Thursday to 61 1/2.

Meanwhile, the jump pushed put prices down across the board and led to a spate of closeouts.

The June 50 puts down 5/16 ($31.25) to 5/8 ($62.50) on volume of 400 contracts and June 60 puts dropped 1/2 ($50) to 3 7/8 ($387.50) on volume of 350 contracts.

Finally, among the index activity, action in the

S&P 100

, or

OEX

, pit -- the place where the

VIX

is determined -- was decidedly showing that traders expect a volatility increase in the short term. "There was a small move in the (S&P 100) futures, and coupled with the order flow, it moved the VIX some," said one veteran OEX floor trader.

The trader said the options traffic in the OEX showed traders buying volatility (essentially buying options) to benefit from continuing uncertainty. "They see more volatility on the horizon and even if the move is up there's a feeling volatility levels will hang around where they are now," he said.

The busiest contracts were on the put side of the aisle. The at-the-money May 680s traded more than 2,100 contracts by noon, and the premium jumped 1 3/8 ($137.50) to 13 3/8 ($1,337.50). The May 675 put premium jumped 1 1/2 ($150) to 11 3/8 ($1,137.50) on volume of more than 1,500 contracts.