Dell Lifts Options Activity as Expiration Positioning Begins

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The trepidation that options players demonstrated the past few days amid a nearly 300-point rally on Monday and Tuesday was thrown off like a thick, heavy coat Wednesday morning as a strong earnings statement Tuesday from

Dell

(DELL) - Get Report

goosed activity just days before expiration.

"People are buying calls again," said Leon Gross, options strategist for

Salomon Smith Barney

. Dell's good news moved its stock up to a new 52-week high of 121 13/16 Wednesday and helped lift the technology sector in the overall market and in options. Dell ruled the options activity on the

American Stock Exchange

as its in-the-money August 110s calls were the most heavily traded option of the morning. Dell was 118 1/2, up 8 15/16, at midday Wednesday.

More than 10,097 contracts in the August 110s moved; and activity in the 120s was neck-and-neck with 10,043 contracts moving. The in-the-money August 105s and 115s were active, but to a lesser extent. Much of the action came against massive open interest in a wide range of strike prices in this favorite of options traders. All August options expire this Friday.

Option prices in almost all Dell call strike prices were rising Wednesday along with the stock. The 110s were trading 8 1/2, or $850 per contract, by midday Wednesday, more than doubling Tuesday prices.

Oddly, the trading looked to be an almost even mix of liquidation of the in-the-money options ahead of expiration and new two-day bets, according to Joe Sunderman, senior research analyst at

Schaeffer's Investment Research

. However, since activity also was strong in the corresponding strike prices in the September calls, it was likely that some rollover activity also was taking place. About 5,532 contracts in the September 120s traded Wednesday morning.

Dell's positive spillover was most acutely seen in

Cisco Systems

(CSCO) - Get Report

, as the in-the-money August 95 and 100 calls were heavy as the 100s moved 9,622 contracts. Cisco's stock was 102 3/4, up 2 9/16, Wednesday.

Compaq

(CPQ)

also was active as its in-the-money August 35s and August 32 1/2s saw robust trading. Much of this action, too, was a combination of rollovers and liquidations, Sunderman said.

Salomon's Gross said investors have bellied up to the big-cap bar and many other known names were trading Wednesday. "I think they are settling down and getting their positions ready for expiration," Gross said, adding that it looks as if individual company options are more in favor than index plays. "Investors are carefully picking some names and playing these."

In other individual plays:

Someone made a kind of a spread bet with

Tel-Save

(TALK)

, which is in the midst of a $300 million stock buyback program. (

TheStreet.com

took a look at the company's recent

earnings report.) About 2,169 contracts in the company's at-the-money September 12 1/2 calls moved at 1 3/8, ($137.50 per contract); while 2,000 contracts of September 20 calls moved at 1/8 ($12.50).

An options trader on the

Chicago Board Options Exchange

said an investor was buying the 12 1/2s and selling the 20s and playing the spread between the two. That would mean this investor was betting Tel-Save would approach September expiration somewhere between 13 7/8 and 19 7/8. Tel-Save was 12 1/2, up 1 5/16, Wednesday.

Newmont Mining

(NEM) - Get Report

saw a similar price spread between its September 17 1/2 and 20 calls, with 4,332 and 6,531 contracts moving. In this case, it looked as if the investor was selling the in-the-money 17 1/2s at around 1 11/16 ($168.75), pocketing some cash and buying the much cheaper 20s for 5/8 ($62.50).

TWA

(TWA)

saw big LEAPS bet in its 1999 January 5 puts as 5,000 contracts crossed the wires against only 4,247 open interest contracts, indicating at least some new buying. The trade went out at 5/16 ($31.25).

The airline has been in a slump recently as its stock has dwindled rapidly from a high of 15 1/8 in March. The stock was 7 3/8, down 1/16, Wednesday morning.