If

e.spire Communications

(ESPI)

is truly in the crosshairs of a suitor, options traders may already be on to it.

Maryland-based e.spire has been on the receiving end of fairly aggressive order flow for the past two sessions, and rumors are seeping into the market that

Qwest

(QWST)

may be taking a look at the possibilities of a deal. "I've heard the rumor," says analyst Frank Murphy with

First Union

. "I think it's highly speculative."

The action primarily has been out-of-the-money call buying, and yes, speculative. Today, e.spire's shares were up 1 3/16 to 9 7/16, making the investors who bought the March and April 10 calls on Friday very happy.

Today, the volume on the March and April calls, primarily those at the 10, 12 and 15 strikes, showed unusually high volume. While it normally trades just 313 contracts a day, e.spire March 10 and 12 1/2 calls traded more than 550 by midday Monday.

The premium on those options also rose considerably today. The March 10 calls jumped to 1 1/8 ($112.50) from 3/4 ($75) and the 12 1/2s price hit 7/16 ($43.75), a 3/16 ($18.75) spike on the day.

Acquiring e.spire, a competitive local exchange carrier, would give Qwest some dearly needed local networks. For several years Qwest has been building a long-distance fiber-optic network for voice and especially data communications. It still lacks certain facilities to connect to some customers.

At an analysts meeting last month, Qwest CEO Joe Nacchio said the company intends to aggressively expand its local infrastructure, according to Murphy. "He didn't clarify whether that would be buy or build," Murphy says.

Buying e.spire would hardly complete Qwest's puzzle, since it serves mostly small to mid-sized metropolitan areas in the southeastern United States. But e.spire is cheap.

Murphy calculates that the ratio of e.spire's "enterprise value" (market cap plus net debt) to its estimated 1999 revenue is 4.3, compared to a group average of 4.9.

e.spire's peers include

GST Telecommunications

(GSTX)

and

ICG Communications

(ICGX)

.

Also, the ratio of e.spire's enterprise value to gross plant and equipment is 2.3, compared to an industry average of 4. By both those yardsticks, e.spire might make a cheaper play than

Teleport Communications Group

, which was acquired by

AT&T

(T) - Get Report

last year.

A Qwest official declined to comment. e.spire could not immediately be reached for comment.

If you were an options pro trading to take advantage of volatility moves, you might have expected

Intel

(INTC) - Get Report

to keep popping up on your favorites list as the company's antitrust suit began.

The problem for some of those volatility buyers this morning was the chip maker settled its suit with the

Federal Trade Commission

, and as a result, the premiums of many Intel options took major hits.

"Once the news came out that Intel was settling with the government, the volatilities were crushed," says Paul Foster of

1010WallStreet.com

. "I presume there were people who wanted it to go higher." Foster says the implied volatility level, a key component in any option's pricing, was at 50 Friday but quickly fell to around 42 this morning.

As Intel's stock price soared more than 3 to 118 by midday, its options premium did fare quite as well. The March 120 puts fell to 4 3/8 ($437.50) from 7 3/8 ($737.50) as volume popped to more than 4,000 contracts. That traffic was likely players who had bought the options expecting Intel to be less stable during a government trial rushing for the exits.

The volatility portion of an option's premium naturally reflects the level of uncertainty around a stock. Any protracted trial involving the federal government would have compounded the instability around Intel's stock and provided put buyers some nice gains.

The Chicago Board Options Exchange did its routine cutting of lightly-traded options on Friday and delisted more than 80 stocks from its ranks, but this time around larger factors may be prevailing.

The nation's largest options exchange, according to veteran traders, had the additional need to clear quote capacity for the eventual listing of other heavily traded options. The Justice Department investigation and the International Securities Exchange launch each mean the end of singly-listed options, a fact that translates into potentially adding

Microsoft

(MSFT) - Get Report

,

Dell

(DELL) - Get Report

, and

Intel

(INTC) - Get Report

options to the CBOE's offerings. Among those the CBOE dumped were

Au Bon Pain

(ABPCA)

,

Donna Karan

(DK) - Get Report

and

Exabyte

(EXBT)

.

"As an exchange, it would be stupid not to have room for other things. Some of these listings were just a waste of screen space," says one Chicago market maker. "If another exchange makes a move, the CBOE has to be ready to make a move."

Traders say the grandfathered options listings that trade only on one exchange could become multiply listed within the next three months, speculation that has exchanges concerned about retaining market share.

Increasing stock splits and runaway Internet stocks with too many strike prices have jammed the electronic pipeline through which quotes flow, making the public markets less credible if the prices are not current. The issue likely is less a problem on the CBOE because its technology platform is more advanced than the nation's other three options exchanges.

-- Medora Lee and Kevin Petrie contributed to this report.