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Dell Trading Leads Options Plays

Call buyers fled the boxmaker today in the wake of Tuesday's earnings. Raychem traders count their takeover booty.

Options investors were rocking well ahead of Friday's expiration, dumping


(DELL) - Get Dell Technologies Inc Class C Report

call options to start and rolling into June calls after the personal computer giant merely matched Wall Street's expectations.

Dell said Wednesday it does not anticipate a major slowdown in information technology hardware spending this year as a result of year 2000 computer problems. Dell on Tuesday reported first-quarter earnings per share of 16 cents, compared with 11 cents in the year-earlier period.

The stock fell 10% to 39 5/8 by midday Wednesday.

"We did a study on Dell via its options, and it seems that while they still report positive earnings surprises, not only have they been to a lesser degree but the analysts are catching up to where the company is on its growth path," said Joseph Sunderman, of

Schaeffer's Investment Research

, an options-trading advisory firm in Cincinnati.

The heaviest activity showed up in Dell May 45 calls, which were down 1 9/16 ($156.25) to a teenie 1/16 ($6.25) on volume of 8,312 contracts. That compares with open interest of 100,394, the largest open interest of any call series in Dell.

It was difficult to determine if May 45 call owners were eagerly looking to roll out their positions into June options or heading for the exits on the beleaguered boxmaker. The combination of the pressure on Dell shares and the exit traffic pushed premium on the June 45 calls down 2 3/16 ($218.75) to 1 1/6 ($106.25) on volume of 12,312 by midday.

Elsewhere in big technology names, a big seller in

America Online


calls, particularly the May 140 strike, hit the screens after the stock started ticking up Wednesday morning, gaining 2 3/16 to 136 1/4.

Those calls slipped 7/8 ($87.50) to 1 3/4 ($175) on volume of over 6,600 contracts.

Computer Sciences


also popped up on the takeover radar again, after further market speculation that

Sun Microsystems

(SUNW) - Get Sunworks, Inc. Report

could be interested in buying the company.

Representatives for both companies said they don't comment on rumors and speculation, the very factors that drove Computer Sciences up 4 5/16 to 64, while Sun slipped 1 3/4 to 62 1/16.

"We're seeing every Computer Sciences strike price active, nothing outstanding in terms of premium, but they're all up smartly," said one options trader with

Wall St. Access

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, a New York discount brokerage. "Looks like the puts are active in Sun too, which would be the perfect match trade if they take out Computer Sciences."

That opinion wasn't unanimous, though. "There just doesn't seem to be the volume in Computer Sciences options that shows people are buying into the rumor completely yet," Sunderman said. The volatility in June calls, he pointed out, while still high at around 118, has dropped from a top of 148 or so.

Still, call buyers today paid 4 3/8 ($437.50) for the June 65 calls, setting themselves up to break even if the stock continues its run to about 70. Volume on the contract was over 1,100 halfway through trading.

May 15 calls in

Premiere Technologies


saw plenty of action after



confirmed it was in discussions to merge with closely held



Shares of Premiere, which owns a significant stake in WebMD, jumped 1 1/16 to 16 1/4 and its May 15 calls gained 13/16 ($81.25) to 1 5/8 ($162.50) as a deal could be announced later Wednesday.

After heated speculation,



got a marriage proposal, from conglomerate

Tyco International



The company is buying the electronic components maker for $2.87 billion dollars in cash and stock. The transaction is valued at $37 per Raychem share. Raychem shareholders will get approximately 1.4 billion dollars in cash and 16.1 million newly issued Tyco shares.

The call buyers who jumped at the

May 30 calls last week were pretty happy this morning.

The premium on the May 30 calls popped 3 1/2 ($350) to 5 1/2 ($550) on volume of 955 contracts after the deal was announced this morning. Last Friday, those same calls could be had for 2 5/16 ($231.25).

As originally published, this story contained an error. Please see

Corrections and Clarifications.