Options traders revel in merger chit-chat, but don't bank on a walk down Electric Avenue in takeoverland.
call options have been active for several days, but it was only Wednesday that a name surfaced as potential mate for the Vancouver, Wash.-based CLEC, which serves the Western U.S. A week ago daily options volume in the stock popped to almost 900 contracts from its average of about 90.
The rumored suitor?
, according to at least one institutional options trading desk. (Call options are generally purchased by investors who want to play a potential run-up in a stock. Mergers are a key provider of such juice.)
But there might be another reason that Electric Lightwave's August 15 and 17 1/2 calls have shimmied up 5/8 ($62.50) to 3 3/8 ($337.50) and 5/16 ($31.25) to 1 13/16 ($181.25), respectively, albeit in thin trading. The stock was up 3/4 to 17 1/2 at midday Wednesday.
This month, Electric Lightwave said it will be the preferred local network access provider for
in a three-year contract. On Wednesday,
agreed to merge with IXC Communications for $3.2 billion in stock and debt.
Based strictly on putting the companies' network maps side-by-side, "our route maps would help create a national footprint," said Electric Lightwave's investor relations director Fletcher Chamberlin. "I'm assuming that's how the rumors started." Otherwise, he dismissed them as speculation.
"There are other West Coast-based CLECs that would fit with us, and East Coast-based ones," Chamberlin said. "Anybody can lay the route maps next to each other and say whatever they please."
Electric Lightwave is 83%-owned by
, which provides telecom and utility services in 21 states.
The Electric Lightwave spokesman went on: "Citizens has stated they want to participate in the growth of the CLEC industry. Right now their objective is to build value in the company. They've never ruled out a transaction either. But in terms of anything specific, we've said nothing."
Hyperion stock was unchanged at 20.
With Tuesday's technology slam dance all played out, among the more actively traded tech options were those in
, which owns telecommunication companies in Europe and Asia.
With the stock up 1 1/8 to 75 1/4, the August 80 calls had inched up 1/2 ($50) to 3 3/4 ($375) on volume of 2,400 contracts. Open interest totaled 1,350.
There also was increasingly active put-trading in
Transaction Systems Architects
, a software support firm that serves the financial industry.
Put trades in Transaction Systems have popped up from time to time on the most-actives for the past month. Then Wednesday morning, another 305 contracts in the August 35 puts traded at 1 1/16 ($106.25). Open interest totals 1,302. Other strikes with heavy open interest include the September 30, September 35 and September 40 puts, each with anywhere from 1,000 to 1,500 puts.
Bull's-Eye on Centocor
first noticed options market chatter about a potential
Johnson & Johnson
match-up exactly three months ago.
Today, the deal was announced.
Finally, a note from
Shameless Self-Promotion Department: Join options expert and author
in a live Yahoo! chat at 5 p.m. EDT Thursday. DeMark and his son wrote
DeMark on Day Trading Options
(McGraw-Hill, 1999), which illustrates the use of options to cash in on the daytrading phenomenon.
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