M&A Chatter Ignites Options of Samsonite, Circus Circus

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With options activity quieter this morning, especially among tech stocks, several speculative option plays took center stage, as traders placed bets on further action in the oil industry and another rumored acquisition by "Chainsaw" Al Dunlap's

Sunbeam

(SOC)

.

Among oil stocks, options activity was high for both

EVI

(EVI) - Get Report

and

Marine Drilling

(MDCO) - Get Report

. Both companies saw heavy call activity, although options specialists deduce different meanings.

EVI saw its March 40 in-the-money calls trade about 3,700 contracts by midmorning, leading options activity among the heavy traders. The calls were trading for 8 1/2 per 1,000 contracts, or $850 each, after dropping in price from 10 per 1,000 contracts. EVI's stock was at 47 11/16, down 7/8.

On Wednesday, EVI announced its $2.4 billion stock-swap acquisition of

Weatherford Enterra

(WII)

. However, reports surfaced today that the

Securities and Exchange Commission

was looking into the preannouncement jump in Weatherford's stock. "I would expect the SEC to investigate the stock trading," says Jim Wicklund, an oil service analyst at

Dain Rauscher

in Dallas, referring to the more than 20% rise and tremendous volume in Weatherford's shares on Tuesday. Nonetheless, Wicklund likes the acquisition and says EVI is not yet finished making acquisitions.

The SEC involvement may be spooking some options investors, one source said. Because there was little action in EVI options except for the March 40 calls, one interpretation could be that someone is making a bet that this deal won't be completed, said Joe Sunderman, senior research analyst at

Investment Research Institute

. "But once arbitrageurs come in on this, it is really hard to figure out these positions," he added.

Marine Drilling saw activity in its April 20 in-the-money calls, moving more than 2,100 contracts. With the stock trading at 22, up 1 3/16, and the options moving at 3 1/4, speculators may be betting the stock could continue to climb. Marine Drilling has recently emerged as a likely consolidation candidate in the oil drilling sector, according to industry observers.

Individual volume on select options was more evident today because overall options activity seemed subdued as the Dow traded up after its drop yesterday. After the preannouncements from

Intel

(INTC) - Get Report

Wednesday and

Motorola

(MOT)

Thursday, some traders were worried that the market was taking these warnings too lightly.

"I'm in a fog," said Bill Yates of

DYR Partners

. "It's pretty amazing when the market doesn't respect what Intel has to say." Yates suggested many of his counterparts were uncertain where tech stocks were heading and may be laying off options bets until they are more certain.

In other merger-rumored options activity:

Samsonite

(SAMC)

continued to see relatively heavy options action. Samsonite's in-the-money March 35 calls and its June 40 calls were actively moving, with 1,220 and 2,350 contracts trading, respectively. Samsonite's stock was at 35 11/16, up 3/16.

The rumor, circulating for the past several days, is that Sunbeam is contemplating a buyout of the Denver-based luggage maker. Sunbeam issued a press release today saying it would not comment on the rumors. Samsonite reportedly hired

Goldman Sachs

as its investment banker earlier this year. "It seems people think this is getting done," said one arbitrageur, requesting anonymity.

In both the Samsonite and Marine Drilling options action, most of the trades coming in were smaller, indicating a wider-based speculation sentiment, said Sunderman. "It looks like a bullish play."

Another M&A-tinged report, out of the

Las Vegas Review-Journal

, that

Hilton Hotels

(HLT) - Get Report

has had discussions with

Circus Circus Enterprises

(CIR) - Get Report

about a buyout in recent weeks, boosted options activity in the target. Circus Circus saw its June 20 calls trade 1,000 contracts, on open-interest of only 1,100, this morning. The options traded at 5 1/8, up 1 1/4. Even cheaper were the March 25 calls, trading at less than 1, which moved 1,000 contracts. Circus Circus's stock also went up 1 3/16, to 23 1/2.

However, others may have been betting the deal wouldn't happen. More than 2,400 contracts of Circus Circus' March 30 puts were traded this morning. The puts sold at 6 1/2, or $650. With the report saying Hilton would pay as much as $32 per share, it is likely activity in the stock and options will continue.

Staff reporter

Mavis Scanlon contributed to this story.