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Options Traders Betting on Siebel Rebound After Tuesday's Plunge

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Some options traders have been placing sizable bets on a bottom the last couple days in the battered shares of Siebel Systems (SEBL) .

One options trader said there were massive amounts of call buying in the January 60 call options on Siebel Tuesday and today. Siebel plunged Tuesday, and traded lower this morning before reversing course. The shares recently were trading up $4.19 to $67.56.

The January 60 calls were trading up 3 1/8 ($312.50) to 16 3/8 ($1,637.50) this morning on the

Chicago Board Options Exchange

, on volume of more than 5,000 contracts. The January 60 calls were even more active on the

American Stock Exchange

, where more than 10,000 contracts have changed hands.

Buying a call option gives the purchaser the right, but not the obligation, to buy a security for a certain price by a specific time; it's a bet that the underlying security will go up. Call options appreciate when the price of the underlying security rises.

One big reason for the downdraft in the shares Tuesday was due to a report out of

Credit Suisse First Boston

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that said that growth in Siebel's core U.S. enterprise business was slowing more than was anticipated.

On Tuesday, options traders were going after

First Union


call options, particularly the January 25 calls and the January 30 calls. Volume in the options overall was above average, and most of the trading was in First Union calls, according to data from

McMillan Analysis


Traders who bought calls yesterday, perhaps anticipating news out of the bank, were right. Unfortunately for them, they bet wrong on the direction. Shares of First Union sold off after the company announced it would cut its annual dividend by 50%. It said the move would save the company $5 billion over the next five years. First Union shares recently were down $1.13 to $27.

Trading in First Union options Wednesday was modest overall. The January 25 calls were down 1/2 ($50) to 2 7/8 ($287.50) on the

Pacific Exchange

, while the January 30 calls were off 5/16 ($31/25) to 1/2 ($50) also on the P-Coast.