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Can't stand the heat? Well, don't be so quick to leave the kitchen.

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And while the heat has been found primarily in tech options recently, there's some coming from unlikely candidates in decidedly low-tech industries.

The best sensor for a hot option is implied volatility, which essentially is the projected movement of the underlying stock. Option traders follow the number religiously because it often signals an impending move in a stock.

If traders on the floor suspect something of a stock or see increased options demand for no apparent reason, they will raise the volatility factor in the price of the related option. That's the tradeoff if investors want to keep wagering. (Remember, market makers are risking their own or their firm's capital to take the other side of



US Airways


is a prime example.

The long-suffering airline's near-the-money March 22 call options and February 22 calls are trading at 82 and 80 volatility, respectively, having risen over the last month, although volume hasn't been going gangbusters yet.

"Most other airline stocks are trading at the low-30s and higher, and we know

Tiger Management's

Julian Robertson still owns" US Airways, Paul Foster of

in Chicago points out. USAir shares have slunk down from a high near 60 last May to 20 5/8 on Thursday. Robertson is a shareholder and hedge-fund-manager-turned-shareholder-activist

angling for some price improvement in US Air stock since last summer. Maybe he was bluffing when it was at 31 a share, but not now."

Another is

Granite Construction



Implied volatility on Granite options over the last month has averaged 38 to 40 on slow-as-molasses volume. This past Monday, volatility jacked up to 61 on more than 700 contracts, and by Tuesday volatility hit 80. March 22 call options were trading at an 85 volatility. Granite shares are down 5/16 to 22 9/16.

"Earnings are coming up soon here, but does that alone justify the volatility doubling? Usually it doesn't," says Foster, who is long shares of Granite, a California-based civil construction and transportation contractor; think bridges, roads, dams and highways.

(Knock! Knock!) Housekeeping!

A bit of financial housekeeping is in order. The

Chicago Board Options Exchange

Thursday announced that so-called Equity FLEX options will no longer be restricted to standard strike prices. Effective immediately, Equity FLEX call and put strike prices are available in 1/8-point increments.

According to a recent IRS ruling, flexible call strikes "have no effect on the determination of 'qualified covered call' status, an exemption from the U.S. tax code's straddle rules for exchange-traded options," the CBOE said in a press release.

FLEX options give the parties the right to customize the expiration date, the strike price, and the exercise style of the contracts and are typically used by institutional investors.

For instance,

Advanced Fibrecom


said Thursday it is using such a flexible option arrangement around its share holding in




Advanced Fibrecom said Thursday that it is going to hedge 5 million shares of Cisco that it owns. (AFC acquired these shares as a result of its

investment in


, which was acquired by Cisco on Nov. 1, 1999).

Advanced Fibrecom reportedly bought a 3-year put struck at 130 (just about Cisco's Wednesday closing price) and sold a 3-year call struck at 200, for equal prices. This strategy is dubbed a "no-cost collar," according to Larry McMillan of

McMillan Analysis

in Morristown, N.J.

More Firms Move into Electronic Options Trading

The electronic options exchange, the

International Securities Exchange

, is further

filling out its ranks. The ISE on Thursday announced some more joiners to the first all-electronic options exchange, due to launch March 24. The ISE added its tenth Primary Market Maker and 28 additional Competitive Market Makers. This brings the number of announced CMM memberships to 87 out of 100.

Banc of America Securities

, a subsidiary of

Bank of America


, joins ISE as the tenth PMM.

New CMM members include

Banc of America Securities


Binary Traders


Botta Trading


G-Bar Limited Partnership


GPZ Trading


Helios Holding


JAS Securities


KBC Financial Products


MDNH Traders


Nordic Options


Omega Options


SG Cowen Securities


Timber Hill

; and

Wolverine Trading