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Options action on



was robust Monday morning ahead of the company's earnings report, slated for release on Thursday.

Call options on Lucent were seeing the most action as the stock surged 3 1/8 to 67 1/8, suggesting that traders were expecting solid numbers from the networking-equipment giant. Going into earnings season, options become the speculators' tool of choice because they are able to gain leverage in wagering on a drastic move coming after a company's earnings report.

Lucent is expected to post third-quarter earnings of 29 cents a share, according to the 19-analyst

First Call/Thomson Financial

consensus estimate. Lucent posted earnings of 26 cents a share in the year-ago period.

About 7,200 of the in-the-money Lucent July 65 calls have traded on the

American Stock Exchange

. The calls were up 1 5/16 ($132.50) to 2 13/16 ($281.25). Lucent's stock was most active on the

New York Stock Exchange

, with 17 million shares changing hands.

Meanwhile, action on


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options was decent Monday after an unusually high amount of trading in the options on Friday.

On Friday, according to

McMillan Analysis

, 99,551 Cisco options traded, 88,370 of which were calls. Average daily volume for Cisco options is 43,040 contracts, according to McMillan.

On Monday, 3,145 of the July 70 out-of-the-money calls changed hands on the

Chicago Board Options Exchange

. The contracts were up 1/4 ($25) to 15/16 ($93.75). The August 75 calls were seeing interest on the

Philadelphia Stock Exchange

, with a little more than 1,000 contracts trading. The calls were up 3/16 ($18.75) to 1 5/8 ($162.50).

The prophetic power of the options market was apparent Monday morning with the news that



was buying

Fort James


for $7.5 billion in cash and stock.

On Thursday,

wrote about Fort James'

unusually high implied volatility and some notable volume on its options recently, noting that the company has been mentioned as a takeover candidate in the past.

Fort James was soaring 8 7/16, or 34.4%, to 33, while Georgia-Pacific was tumbling 2 5/8, or 9.2%, to 26 at midday Monday.

Under terms of the deal, Georgia-Pacific will acquire Fort James for $29.60 a share in cash and 0.2644 shares of Georgia-Pacific stock. Based on Georgia-Pacific's stock price Monday morning of 26, the stock portion of the deal is valued at $6.87 a share.

In sum, the deal values Fort James at $36.47 a share, a 48.5% premium to Fort James' closing price Friday of 24 9/16. The deal is projected to close, subject to regulatory approvals, in the fourth quarter.

The maximum value that can be received by Fort James shareholders is $40 per share: $29.60 in cash and $10.40 in Georgia-Pacific stock. Fort James, based in Deerfield, Ill., makes Quilted Northern bath tissue, Brawny paper towels and Dixie cups, in addition to business, office and printing paper. Georgia-Pacific, headquartered in Atlanta, is a maker and distributor of paper and building products. Georgia-Pacific makes Angel Soft, Sparkle, and Coronet tissue products.