Options Players Taking a Shine to Sun; Traders Look for Protection

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With storm clouds looming over most technology stocks, could it be time for the

Sun

(SUNW) - Get Report

to rise?

Judging by today's early options activity, a slice of the Silicon Valley-type investment community has Sun's out-of-the-money calls moving. The December 40 and January 40 strikes traded heavily this morning as Sun's shares climbed a slim 13/16 to 38 5/8. Volume on the December 40 calls hit 1,048 by midday on open interest of 5,426 contracts, while the January 40 series traded almost 2,000 contracts on open interest of 7,827. Activity on Sun's put options was limited.

Word from the floor of the Pacific Exchange, where Sun's options trade, was that there was strong "public interest" in the 40-level options from a variety of players, and the Sun crowd on the P-Coast has been selling. With the rest of the sector being ravaged, traders are wondering whether the activity is indicative of some underlying news on the horizon. The only major reported news this morning involving Sun was a story that

Intel

(INTC) - Get Report

would be rolling out a $500 low-cost PC that would compete with Sun products. That report by itself wouldn't be strong enough to keep Sun above the mess that the rest of the sector is wallowing in today.

In other points around the options markets today, bear spreads and call writing were prominent as traders and institutions staked out defensive positions in today's market amid overall uncertainty as well as fear of the dazed tech sector, traders said today.

The tech weakness of yesterday touched networking powerhouse

Cisco

(CSCO) - Get Report

, dropping its shares 2 71/6 to 84 1/16 by midday. Options activity was showing a somewhat different story. Retail investors, traders said, were continuing to buy tech-stock calls on the dips, keeping the sector crackling. Cisco calls were among the most popular as the out-of-the-money December 90 series traded more than 2,013 contracts. "Two days ago, it looked like Cisco was going to explode," said

Smith Barney

options strategist Kevin Murphy. "But with everything that going on in Asia, it's still a big wild card."

Cabletron

(CS) - Get Report

is still feeling the pain of yesterday's pre-announcement of sluggish earnings. The stock was down 1 1/16 to 14 5/8, but an investor appeared to be buying the January 20 calls -- a pretty bullish indication on the company.

On the protection side, one major institution had put a bear spread on

Telebras

(TBR)

as an institution rolled from a 2,500-contract December 37 1/2 position to a June position at the same striking price.