Earnings, legislation and more short squeezes: this week's news plus expiration coming on Friday are making for some fireworks in options trading.

The Republican-controlled

Senate

this week rejected most major Democratic proposals to strengthen the rights of patients in managed-care plans, including an initiative that would have given physicians, rather than insurance companies, the final say over patients' treatment.

The news could have a positive impact on HMOs such as

Humana

(HUM) - Get Report

and

Oxford Health Plans

(OXHP)

.

Call prices appreciated in the wake of the news, with

United HealthCare

(UNH) - Get Report

August 55 calls up 1 1/8 ($112.50) to 5 ($500) and August 60 calls up 13/16 ($81.25) to 2 11/16 ($268.75).

Meanwhile, among disk-drive companies,

Sandisk

(SNDK)

proved to be a lesson in how slow-and-steady options activity drops the kind of hints that options investors should look for.

Sandisk has seen the implied volatility in its options "climb steadily from the low 60s to the 70s in the past 30 days," according to one Chicago-based trader. Late Wednesday, Sandisk call options were trading much more heavily than usual, and prices shot up across the board. The stock closed up 5 1/4 at 55; July 50 calls shot up 3 5/8 ($362.50) to 5 1/8 ($512.50); August 55 calls had gained 1 11/16 ($168.75) to 4 3/8 ($437.50).

After the company's better-than-expected earnings, those same calls were trading Thursday at 6 3/4 ($675) and 8 5/8 ($862.50), respectively.

Merrill Lynch

, a bit late in the game, upgraded the stock to long-term buy from accumulate Thursday and raised its 1999 and 2000 earnings estimates to 80 cents a share from 75 cents and $1.16 a share from $1.10, respectively.

Also, look out for a potential short squeeze in

Amazon.com

(AMZN) - Get Report

along with equity, index and Treasury/interest-rate options monthly expiration this Friday. (Technically, the options expire Saturday, but they cease trading Friday.) Amazon's stock has zigzagged around 140 for the past few weeks, and meanwhile "a sizable open interest was accumulating in the July 140 put and call strikes: roughly 5,000 contracts in the calls and 2,000 in the puts," said one Philadelphia-based options trader.

The stock price was up 3 13/16 to 138 3/4, closing in on the key 140 strike price. Amazon's July 140 calls were up 1 1/8 ($112.50) to 2 3/4 ($275), and the July 140 puts were down 2 3/4 ($275) to 3 5/8 ($362.50), both on the

American Stock Exchange

.

Finally, a large trade in

Qwest

(QWST)

, with 15,000 contracts in the July 32 1/2 puts, crossed late Wednesday up 1/8 ($12.50) to 3/16 ($18.75).