Some options traders have been laying out feverishly bullish wagers on call options on

Navistar International

(NAV) - Get Report

during the past few trading sessions.

Renewed speculation that the Chicago-based truck maker will be taken over helped juice up call-buying in Navistar on Friday and drove prices for Navistar options sharply higher. But the weekend came and went without a deal.

The call-buying continued on Monday, the day a former Navistar employee killed four people before killing himself at a company factory outside Chicago.

On Tuesday, though, Navistar's stock sold off modestly, and the price of call options bought Friday and Monday slumped as the enthusiasm for a potential deal appeared to cool. Many of the speculative positions, however, remain in place.

Some options-market pros say that in light of the shooting, it's unlikely that a deal -- if there ever was one in the works -- will happen immediately.

That puts Navistar speculators in a familiar position, chasing an acquisition of the company, but mostly coming up empty.

It's possible that some traders are positioning themselves in the hope that Navistar posts better-than-expected quarterly numbers next Friday (options expiration day), Feb. 16. Or they could be hoping for a run-up in the stock ahead of the shareholders' annual meeting on Feb. 20, at which shareholders will vote on some board of director seats and a measure to drop the company's "poison pill" defense plan to ward off unwanted acquisition offers.

Of course, none of this is to say that Navistar won't get taken out; market rumors often crop up for valid reasons, but recent options action does provide a cautionary tale to traders about chasing a deal.

Call-Buying Tumult

On Friday and Monday, it was all about traders buying the February 30 calls.

A

Chicago Board Options Exchange

trader said action in Navistar options was mostly call-buying in the February 30 strike price. He said rumors of a possible takeover have been around for a "couple of years," but that the recent call-buying was heavier than that in the past.

Tuesday morning brought some more call-buyers out, again in the February 30 contract, but as the day wore on, the action turned to call-selling as investors apparently began to bet against Navistar, or at least dump their speculative positions.

That speculation helped Navistar shares rise from $28.01 at Thursday's close to $30.49 at Monday's close before the stock retreated 90 cents to $29.59 on Tuesday. It recovered Wednesday to rise 8 cents to $29.67.

On Friday, more than 2,000 of the February 30 calls traded on the CBOE, and another 1,550 traded Monday. On Friday, the contract's price rose as high as 2.55 ($255) from 1.25 ($125). The contracts peaked Monday at 2.85 ($285).

More than 5,000 of the 6,543 Navistar options contracts that traded Friday were calls, according to

McMillan Analysis

. On Monday, calls accounted for 4,509 of Navistar volume of 5,429 contracts. Both days' action vastly exceeded the company's average daily options volume, according to McMillan's statistics.

By Wednesday, the last trade on the CBOE for the February 30 calls was at 1.80 ($180), a slight recovery from Tuesday's 1.60 ($160) close, but still a level that left many speculators almost empty-handed.

With open interest (the total number of options contracts that have not been exercised or allowed to expire) at 10,573 in the February 30 calls and just 526 contracts in the puts as of Tuesday's close, traders have set themselves up for glorious news out of a company not known for glorious news.

Still, the Seidman-Skupp options team at

Miller Tabak

has seen call buying in Navistar for the last couple of weeks and has had the company on its "positive watch list" since Jan. 30.

Takeover Talk Nothing New

The rumor mill is a familiar place for Navistar. In October, its shares surged in the wake of a trade publication's report that said truck maker

Paccar

(PCAR) - Get Report

had offered to buy Navistar's assets. Paccar, which makes

Kenworth

and

Peterbilt

trucks, denied making an offer, according to published reports.

From there it got worse.

In early December, Navistar's stock plummeted after it badly missed Wall Street estimates for fourth-quarter earnings.

John Horne, Navistar's chairman, president and CEO, said the company would "continue to pursue strategies and look for ways to increase our scale and add to shareowner value."

But last week,

Providence Capital

, a New York-based investment bank with an activist shareholder bent, said it opposed Navistar's four nominees for the company's board of directors. Providence is urging shareholders to vote "withhold authority" on the election slate at the Feb. 20 meeting so they can show "their concern over the Board's chronic failure to address" Navistar's problems.

The measure to remove the poison pill has been put forward by

Gabelli Asset Management

, which is the company's second-largest shareholder, and is supported by Providence.

Navistar wants to keep the defense, which was approved by the company's board in 1999. As of Dec. 31, Gabelli held 5.13 million shares of Navistar, or 8.6% of the company, a stake topped only by the

Fidelity

mutual fund family, which owned 15% of Navistar as of Dec. 31.

Fundamental Weakness?

This coming quarter, the company is expected to post a loss when it announces first-quarter results on Feb. 16. The five-analyst

First Call/Thomson Financial

consensus estimate is calling for the company to lose 61 cents a share in its fiscal first quarter.

Some of the company's hopes for recovery are pinned on the introduction next week of Navistar's

International Truck and Engine

unit's new high-performance truck series, an event held at the Mandalay Bay Resort in Las Vegas.

Paul Foster, of

1010WallStreet.com

, said he doesn't expect a deal after Monday's shootings, at least not for the seven trading days before February options expire.

And while he's staying away from Navistar at current levels, he does have a bid in at $27.31.