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A fierce rally in stocks made call options attractive again after several days of heavy put buying by traders and investors.

Thanks in part to some better news on the earnings front, major market gauges were soaring at midday. Reflecting the improved feeling in the market, the

Chicago Board Options Exchange

equity put/call ratio and the overall options market equity put/call ratio dropped sharply from Wednesday's levels.

One Wall Street options trader said that on Wednesday there was a lot of short-covering as the market rebounded from the scary levels it fell to at the open. Thursday's action was a matter of people putting money to work, he said.

The trader said many people were rolling call option positions into November from October. Tomorrow marks expiration for October equity and some index options.

Some of the broad-minded optimists went for the in-the-money

Nasdaq 100 unit trust


, or QQQ. The QQQ November 80 calls were seeing huge volume Thursday with nearly 19,000 trading, far surpassing the 7,890 that had been created by Wednesday's close.

The November 80 calls were trading up 2 3/4 ($275) to 6 7/8 ($687.50). Also, the November 81 calls were seeing sizable volume also, with more than 15,000 calls trading, compared to open interest of 905 as of Wednesday's close. The November 81 calls were up 2 3/4 ($275) to 6 3/8 ($637.50). The underlying QQQ was up $5.50, or 7.1%, to $83.50.

A call option is a type of option that gives the purchaser the right, but not the obligation to buy a security for a specified price at a certain time, and is for the most part a bet the stock will go up. A put option reflect the opposite sentiment, rising in value as the stock price falls. Investors buy puts to either speculate that a security is going to fall, or they buy them to use them as insurance against a long position in a security.

While the recent rallies have heartened more than a few traders, some market pros aren't necessarily big fans of the huge surges.

"I think most of these rallies are short-covering rallies," said Jordan Kahn of

Kahn Asset Management

. The ferocity of some of the recent rallies "makes you question whether they're sustainable," Kahn said.

In part, the short-covering-inspired surge comes from people who bought puts earlier in the week blowing out of those positions and selling the puts back. That in turn leads market makers -- obligated to buy those puts back -- to purchase the underlying stock to hedge themselves. That dynamic creates upward pressure on stocks.

After a slow start, traders were picking up their interest in playing options on

Fairfield Communities


, which announced Wednesday that it's in preliminary talks with an unidentified party regarding "a possible merger or other transaction."

The company said, "There can be no assurance that these discussions will lead to a definitive agreement" and it won't make any further announcements until a deal is reached or until talks are killed.

Recently, activity in Fairfield's options has caught the eyes of options market analysts because of unusually active call option buying and rising prices for those contracts.

With the announcement Wednesday, volume in Fairfield's options was heavier than normal, with a total of 2,090 contracts changing hands, 1,680 of which were call options, compared to overall average options volume of 720 contracts, according to

McMillan Analysis

. Halfway through Thursday's session, the majority of trading in Fairfield options was on the call side.

On Thursday, shares of Fairfield, which is based in Orlando, Fla., were up 31 cents to $12.25. The stock's 52-week intraday high is $13.13.

Among Fairfield options Thursday, the price of the November 12 1/2 call options perked up 7/16 ($43.75) to 1 5/16 ($131.25) on volume of 200 contracts.