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Options Traders Make Bold Moves in Confused Market

Traders today are seeing some big plays in some rather small names.

As the overall market floated in a noncommittal range this morning, options traders weren't shy about making some oddball plays that stood out like beach blankets on the tundra.

Trading in online brokerages like







National Discount Brokers


and market maker



continued on the brisk pace established in the past week.

Trading in Ameritrade centered on a particular contract -- the 2001 January 16 5/8 puts-- that was active

last month just as the online broker was issuing a poorly received convertible offering.

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This time around, traders said

Bear Stearns

was the buyer of the very same puts -- to the tune of about 3,300 contracts, at a price of 6 ($600 per contract), according to the

Pacific Exchange

market maker who was the seller on Wednesday. That trade now represents about half of the open interest in that strike.

"I don't know if it's against the convertible," said


James Burleson, a primary market maker in San Francisco. "If I were a betting man -- and I'm not because I trade options -- I'd guess they're buying puts and stock" at the same time, he added. In other words, the puts represent an insurance policy in case the stock falls even further; the buyer of them likely then would hold a corresponding amount of stock in his or her portfolio.

There might be another reason for the timing of the purchase. Earlier this week, Ameritrade's convertible bonds became available to retail investors; prior to that, they were limited to those known as "qualified investors."

There were also a few glaring examples of options prices moving in the opposite direction of where they should -- a good sign there's news afoot.

Take the case of



, an electronic components company.

The stock was down 9/16 to 55 7/16 on Thursday, but the call options -- generally bets that the stock will rise -- in October and November continued to add gains for the second straight day. The October 55 calls gained 1/4 ($25) to 3 3/8 ($337.50), the 60 calls gained 1/4 ($25) to 1 1/4 ($125) and the November 55 calls gained 3/8 ($37.50) to 5 3/8 ($537.50).

The same situation was developing in



, which owns and operates the

Jack In The Box

fast-food restaurant chain. Late Wednesday, trades in the December 25 calls crossed on the Pacific Exchange, and the stock has lately climbed 5/8 to 25 1/16. The October 25 calls have gained 1/2 ($50) to 1 3/16 ($118.75).




options carefully as well. Though the stock has edged up 3/16 to 38, the October 40 puts were in big demand on Thursday, up 3/8 ($37.50) to 2 3/4 ($275) on volume of over 1,000 contracts and open interest of just over 500; so were the November 40 puts, up 3/4 ($75) to 3 3/4 ($375).


more options activity turned up in



, which began to show signs of life last month.

Those 2001 January 12 1/2 and 17 1/2 call options have dropped in price to 3 1/4 ($325) from 4 3/4 ($475) and to 1 9/16 ($156.25) from 2 7/16 ($243.75), respectively.

Thursday's options activity in AutoNation, which recently announced it is splitting into separate companies, popped up in the 2000 April 17 1/2 calls. Roughly 2,500 call options traded at a price of 1/2 ($50).