Call Buyers Pile into Oracle Rally

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Trading in

Oracle

(ORCL) - Get Report

options was brisk Tuesday as the software company's stock continued its recent rally.

The robust volume in Oracle options came as traders and investors positioned themselves ahead of the company's earnings report, slated for release next week. Shares of Oracle were up $2.63, or 9%, to $30.81.

Oracle will release its second-quarter earnings after the close on Thursday, Dec. 14. That will be one day before the December expiration. The

First Call/Thomson Financial

31-analyst estimate calls for the company to earn 10 cents a share.

Some options market participants said that overall action in the options Tuesday was mixed, though volume in options expiring in December was tilted toward call options. A call option is the type of option that gives the buyer the right to buy a stock for a certain price by a specific time.

On the

Chicago Board Options Exchange

, Oracle's December 30 calls were up 7/8 ($87.50) to 2 1/4 ($225), while the December 32 1/2 calls were up 1/2 ($50) to 1 1/8 ($112.50).

Luke Rahbari of

Letco

, the designated primary market maker on Oracle options at the CBOE, said Oracle shares had been a little oversold before bouncing back and climbing over the last few sessions. As recently as last Thursday, the stock traded down as low as $21.50 intraday.

One Wall Street options trader, speaking when the

Nasdaq 100

was up 7%, said the market has been "due for a bounce for quite a while" because more value-oriented investors have begun to bid for battered technology and telecom stocks.

While those investors have been getting in, momentum traders have been getting out of those kinds of stocks.

With value -- relatively speaking, of course --investors getting into formerly supercharged, expensive sectors, the trader said a case can be made that the volatility of those sectors will decrease because value money managers in general stay in a stock a lot longer than a momentum trader.

As for today, he said he was expecting the market to close around where it was trading late in the morning. If the market doesn't hold on to its gains and the rally fails, though, it could spell trouble. "If we don't hold on, that's not good at all," he said. The NDX was recently up 8.6% to 2774.

The

Albertson's

(ABS)

put option buyers that hit the market last week were

so

on the money.

Those traders were out in significant numbers last week buying put options on Albertson's ahead of the grocery-store chain's earnings, released Monday after the close.

Traders buy put options to either speculate that a stock will fall or as protection against a long position in a stock. A put option gives the purchaser of the option the right to sell the underlying security for a specific price by a certain time.

While Albertson's quarterly numbers disappointed Wall Street, they were a reason to celebrate for put buyers. Shares of Albertson's slumped $1.50, or 6%, to $22.56. The stock had traded as low as 21 intraday.

Some of the puts that were popular last week on Albertson's have seen their values jump as Albertson's stock has fallen. The December 25 puts were up 15/16 ($93.75) to 3 ($300) on the CBOE. The December 22 1/2 puts were up 1/4 ($25) to 1 1/8 ($112.50).

Albertson's reported earnings, excluding merger-related costs and one-time charges, of 45 cents a share, three cents shy of the

First Call/Thomson Financial

18-analyst estimate. The company earned a penny more than the year-ago period.

But the bad news didn't end there for Albertson's. The company also lowered guidance for fourth-quarter earnings. The company warned that it expects to post, excluding merger-related costs and one-time charges, earnings of about 50 cents a share.

That 50 cents-a-share earnings figure falls a mile short of the current First Call 16-analyst earnings estimate of 75 cents. Albertson's also said that it expects fiscal 2001 earnings, excluding items, to rise 10%.

Of course, the Wall Street analysts were out today with earnings-estimate cuts and a couple of downgrades. Too little, too late, for many of their clients. They were just in time, though, for those put buyers.