Intel, First Union Options Rally Even Amid a Broad Selloff

Plus, heavy action in the oil services index.
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The technology sector was taking it on the chin Thursday, but a few bulwark stocks and their options -- blue-chip biggies such as

Intel

(INTC) - Get Report

-- held on for dear life.

"Anyone who thought that this was going to end with last Tuesday's rally is in for a rude awakening," said Gary Semeraro of

S.G. Cowen

in New York City. "This is a grinding, rolled-out correction. Even so, there are still some call buyers around in some of the large-cap tech names, nibbling down at these levels."

Meanwhile, the key fear gauge, the

Chicago Board Options Exchange's

volatility index, or VIX, continued hovering around its new home, the 25 level. "It has come up so fast from down under 20 a few weeks ago, I wouldn't be surprised if we see it climb to the 28 area soon," Semeraro added.

Down only 7/16 to 69 7/8 amid the tech carnage, Intel was the main name luring call buyers, and among the most active strikes was the January 60 call, up 1/2 ($50) to 14 3/4 ($1,475). The October 50 calls were up 1 1/8 ($112.50) to 21 1/2 ($2,150).

SGI

(SGI)

calls were buzzing with aggressive buyers in the market. Shares of the company, which produces workstations and other computer systems, actually rose 11/16 to 17 5/8 on a day when the rest of the sector was in a slump.

Its August 20 calls were up 3/16 ($18.75) to 1/2 ($50) and September 17 1/2 calls up 5/8 ($62.50) to 2 1/8 ($212.50).

A Mountain of Speculation

On the speculative side of the market,

First Union's

(FTU)

out-of-the-money August 50 calls bounced 13/16 ($81.25) to 1 1/8 ($112.50) on rumors of high-level management changes at the bank, according to one analyst. Volume in the contract hit 2,500 midway through today's trading.

The August 45 call volume popped to near 1,500 contracts, traffic that drove the price up 1 1/2 ($150) to 4 ($400).

First Union traders at the

Pacific Exchange

said institutions came in at the open and bought the August 50s "all the way up" from 3/8 ($37.50). First Union options had been quiet for the past three months, but the rumors have made "everyone care again" about the big bank's prospects, the trader said.

First Union has recently been punished for poor management and earnings revisions, and the hope of the market apparently is that this would signal a change in the direction of the bank, according to one analyst. First Union shares were up 15/16 to 47 13/16.

Heavy Crude Action

Inflation worries didn't miss their mark in the options market. Recent lonelyheart

Philadelphia Oil Services Index

, or OSX, rocketed up around 80, with activity in the September 80 and 90 index call options.

The index was up 2.33 to 79.96, and the at-the-money September 80 calls gained 1 5/8 ($162.50) to 6 1/8 ($612.50) on volume of 750 contracts. The September 90s were less actively traded, but still inched up 1/8 ($12.50) to 2 ($200) per contract as some optimists placed their bets on strength in the sector.

What a Waste

Garbage gurus

Waste Management

(WMI)

brought some more bad

news to the Street's doorstep when the company cut its second-quarter earnings target. Again.

The stock's been taken to the mat already, but it is probably too early to start buying calls until after the Aug. 3 earnings announcement, said Paul Foster with

1010WallStreet.com

in Chicago.

By the way, Leon Cooperman of

Omega Advisors

was on the company's conference call and asked when and how big a stock buyback would be. "Volatility will probably go back down after the earnings announcement, so until then investors might want to avoid risk and do some sort of time spread," Foster said.

Waste Management stock was down 5 1/4 to 26 3/16; even so, an investor opened up a position in the September 25 calls, which were up 2 3/4 ($275) at 2 3/4. Open interest was zero before the 50-contract order crossed.