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Oracle Earnings Draw Bullish Speculation in Options

A big trade takes a slightly optmisitic lean on Oracle.

A big bet on

Oracle

(ORCL) - Get Oracle Corporation Report

right off the bat in Monday's trading session gave a clue to how the market is speculating on the company's earnings Tuesday and could set the tone for the tech sector this week.

The

Morgan Stanley Dean Witter

desk had a customer buying roughly 18,000 June 25 calls in Oracle at 1 3/4 ($175), against which the customer sold 900,000 shares of the common stock, according to the head of another large institutional options desk.

Oracle shares rose 1 1/4 to 26 9/16 by midday.

"It's a defensive strategy, but it lets them maintain the bullish position ahead of earnings," he said. "There are a lot of Oracle bets on the table, and there is a huge open interest in the June strikes. This is the big trade of the day, possibly of the week." Earnings are due out after the close Tuesday.

Oracle's June 25 calls were up 1/2 ($50) to 2 1/8 ($212.50) on volume of 20,098 against open interest of 14,574.

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Oracle is expected to report fourth-quarter earnings of 32 cents a share, up from 27 cents a year earlier, but results are expected to reflect a drop in demand for software related to the year 2000 problem and slower growth at its consulting business.

Investors have only a week left until their June options expire, and the triple-witching potential has added an uneasy feeling to trading. Triple-witching describes the simultaneous expiration of equity options, index options and index futures and occurs once a quarter.

Separately, the options trader said, customers have been piling into Oracle puts since last week.

And a large seller of

Morgan Stanley Hi Tech

index calls hit the market early Monday, selling 2,000 June 990 calls. "Somebody's closed out of them, and it looks like that was a bad trade for whomever was the seller since the whole trading floor is hedging themselves against the index."

The call price dropped 8 3/4 ($875) to 39 1/4 ($3,925) on volume of 2,065 against open interest of 2,761. The index was down 9 to 1,021.

Elswhere in the technology sector,

Vitesse Semiconductor

(VTSS)

has seen consistently active trading in its options for the past week or so. July 45 puts in Vitesse dropped 1/4 ($25) to 3/8 ($37.50) on volume of 5,320 contracts vs. open interest of 5,069. The stock was up 2 1/6 to 60 3/8 on Monday.