Options Traders Looking for a Knight/Trimark in Shining Armor

More speculation about the possibility of a deal for the online broker. Plus, Sabre watch.
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You try to ignore the press-hungry Internet brokerages, but sometimes you just can't. Options investors, for instance, certainly seem to have a hankering for them these days.



stock, for instance, rebounded slightly Thursday after

Hambrecht & Quist

this week cut some earnings estimates. The brokerage has been a rumored candidate for some sort of combination with a bulge-bracket brokerage, and the name that often surfaces (but never quite gets any air in its lungs) is

Merrill Lynch



With the stock at 31, Knight's October 32 1/2 calls, which are slightly out of the money, were being bid up 1/2 ($50) to 1 ($100).



, which also joined stock market gainers Thursday, has counted its options among the more active ones two sessions in a row. But the more interesting options trade was in

Automatic Data Processing


, which routes buy and sell orders between brokers and the stock exchanges. ADP, known as a payroll service provider, also serves about half a dozen online brokers.

An investor apparently "rolled" a 3,000-contract position in the November 37 1/2 calls out to 2000 May 40 calls, for the same price. The November 37 1/2 calls were sold at 7 1/2 ($750 per contract), and the 2000 May 40 calls, or LEAPS (long-term equity anticipation securities), were bought at 7 1/2.

Translation: The investor is paying the same amount but getting more time, a key element in determining an options price. The trader was able to finance the purchase of some options expiring months out in the future by selling their current position in shorter-dated options -- but at the same price.

We've been keeping an eye on some rarely traded names in options, among them


(UIS) - Get Report


Cummins Engine


. As the stock drifted up 1/16 to 50 15/16, roughly 100 October 50 puts crossed Thursday at a price of 1 3/8, down 1/8. Puts, which give the holder the right to sell the stock, are often construed as bets on the stock price falling.

Cummins Engine

last month said its CEO, James Henderson, will retire at the end of the year. Henderson will be succeeded by President and COO Theodore Solso, a 28-year veteran of the company.

Unisys, meanwhile, logged in a fat trade in the October 40 puts: 1,000 contracts, compared with open interest of just 372 contracts.

The stock priced ratcheted up 15/16 to 47, and the October 40 puts crossed at 1/4 ($25), up 1/8 ($12.50).

We'd also like to point out, for probably the umpteenth time, that a good way to tell if something's afoot in a public company is through the options looking glass. For instance, take the case of


(TSG) - Get Report

, which this week announced plans to acquire

Preview Travel


, an Internet travel site.

Yes, the news is out, but the implied volatility -- a percentage option traders plug in to calculate how an option on a stock should be priced -- is for some reason still higher than normal in Sabre Holdings. The stock was down Thursday, off 11/16 to 50 1/8, but the prices of call options are still on the go (call options, which give the holder the right to buy the stock, are often viewed as bets on the stock price rising).

The October 45 calls gained 7/8 ($67.50) to 5 3/8 ($537.50), and the 2000 February 55 calls gained 1 1/4 ($125) to 4 7/8 ($467.50).