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Index Plays Heat Up for Bullish Options Traders

Put selling has crept into S&P 100 plays.

As one of the longer expiration periods of the year comes to a close, the usual flurry of activity in index options took place Thursday ahead of Friday's close. While investors seemed bearish -- or at least unimpressed -- with the current equity market climate, signs are cropping up that options traders may be feeling a little bullish and leveraging that sentiment in index plays.

Yesterday's current put/call ratio on the

S&P 100

index options, known as


, was 1.2. The ratio hit three bullish readings in April when it topped 1.6, which was the highest level since last November. At the end of April, the ratio was as high as 1.9.

This week, put selling continued, with

ABN Amro

the most-oft-mentioned Wall Street dealer name going around on the floor of the trading pit. On Wednesday, ABN Amro was a big seller in May 675 OEX puts, and on Thursday, again ABN Amro "has just been buying and selling all day long," said an OEX pit trader based in Chicago.

"The rest of the trades have mostly been at-the-money puts, and we've had customers getting into a lot of these," said one OEX trader on the

Chicago Board Options Exchange


Put selling, especially in the out-of-the-money strikes, shows that some portion of the trading community doesn't think the overall market is going to be weak through Friday. Selling a put is a bullish strategy that reflects a belief that the contracts are unlikely to be exercised.

On Thursday, the OEX was down just 0.2 to 678.7, and May 675 puts slid 7/8 ($87.50) to 2 1/4 ($225) on volume of 7,157. The most actively traded series was the May 680 puts trading on the CBOE, with the price down 1/2 ($50) to 4 5/8 ($462.50) on volume of more than 12,000 contracts.

Other stars in Thursday's show were options on oil stocks.

Options on oil stocks and related listings lit up trading early in the session, with names such as





(HAL) - Get Free Report





Burlington Resources

(BR) - Get Free Report

active on the call side.

Longer-term call activity in Mobil, which was trading up 5/16 to 98 5/16, showed up in the August 105 calls, which traded more than 1,800 contracts for about 3 1/4 ($325).

That trading "seems less like speculation than the action in the smaller names," according to Bill Yates of

DYR Associates

, an options consulting firm in Vienna, Va. The volume in the smaller firms, he said, "is probably tied to the price of oil and the recent moves than to a larger call on the oil and gas industry in general."

Bets on Mobil are often interpreted as a proxy for a wager on the future of the industry.

Optimism in the oil sector recently had been based on the hope that an agreement to cut output reached in March by


and other major producers would curb a world glut of oil later this year. A recent rally in crude seemed to bear that out and had pushed futures on the

New York Mercantile Exchange

to a high of $19.05 a barrel Wednesday from just above $11 in mid-February.