Parametric Options Perk Up as Nasdaq Slides - TheStreet

Some traders and investors were placing some upside bets on

Parametric Technology

(PMTC)

Wednesday as the stock rose in the face of broad

Nasdaq

weakness.

One options trader at a big Wall Street shop said the action was spurred by rumors that Parametric was going to be taken over. Parametric's stock has traded in a narrow range, from roughly $10 to $14 since late May. The stock is well off its 52-week intraday high of $35.94.

There was a decent amount of volume in the November 12 1/2 calls, particularly on the

American Stock Exchange

and the

Philadelphia Stock Exchange

, where about 3,200 contracts changed hands. On the Amex, the calls were trading up 7/16 ($43.75) to 1 1/16 ($106.25).

Another 300 of the November 12 1/2 calls traded this morning at the

Chicago Board Options Exchange

.

Parametric, a software company based in Waltham, Mass., recently has announced that it had received orders for software products from ITT Industries and Hyundai Motor Company that total of about $9.3 million.

One big investor made a prescient options trade Tuesday, selling about 14,000 call options on battered

Razorfish

(RAZF)

ahead of the company's earnings announcement.

A customer of a major investment bank yesterday sold the Razorfish call options on the

Chicago Board Options Exchange

, a trade that hinges on the stock not making a dramatic move upward. While shares of Razorfish rose 7.5% yesterday to close at $5.31, in the wake of its earnings announcement after the close, the stock is getting hammered Wednesday. Shares of Razorfish, a New York-based Internet consulting concern, tumbled 63 cents, or 11.8%, to $4.69.

On Tuesday, the customer sold 9,000 January 10 calls for around 5/16 ($31.25) and sold 5,000 January 7 1/2 calls for about 11/16 ($68.75). By midday Wednesday, the January 10 calls were down 1/8 ($12.50) to 1/4 ($25), while the January 7 1/2 calls were off 1/16 ($6.25) to 1/2 ($50).

The investor may have sold the calls against a long stock position in Razorfish (which would be for the most part unfortunate, considering that the stock is a mile off its 52-week intraday high of $56.94) to offset losses. Or possibly done a buy-write, simultaneously selling the calls and buying the underlying stock.

By selling the January 10 call options, the investor is betting that by expiration, in this case Jan. 19, that Razorfish shares will be below the 10 strike price and that the options will expire worthless and the call seller will keep the premium taken in for selling the option. The January 7 1/2 calls are a winner if the shares are below that level at expiration.

Razorfish, which issued an earnings warning in early October, posted pro forma net income of a penny a share, missing the

First Call/Thomson Financial

nine-analyst estimate of a profit of 2 cents a share.

Oh, how nice it is to be right.

The pros buying those out-of-the-money calls on

Amazon.com

(AMZN) - Get Report

Monday are basking in the glow of genius Wednesday, as the price of the calls they bought earlier in the week soared with a rally in the online bookstore's shares.

A

Chicago Board Options Exchange

trader said Monday that pros were buying out-of-the-money calls on Amazon.com while selling Amazon.com stock. By dumping the stock, the investors protected themselves from potential further downside in the stock, while the out-of-the-money calls gave them a less expensive way to maintain a long position if the online retailer's shares rallied after the announcement of its quarterly

results -- which is exactly what the stock has done. Amazon.com was up $5.25, or 17.8%, to $34.81.

After the close Tuesday, Amazon.com reported a narrower-than-expected loss and better-than-expected sales for the third quarter. The e-tailing behemoth also expressed an upbeat outlook for the critical fourth quarter.

On Monday, a healthy amount of November calls traded, notably calls with strike prices of 30, 32 1/2 and 35. Around midsession on Monday, the November 30 calls were trading at 3 7/8 (387.50), while today they were trading at 6 3/4 ($675) on the CBOE. On Monday midday, the November 32 1/2 calls were trading at 2 9/16 (256.25), while on Wednesday, those calls were trading at 6 ($600). Also on Monday around midday, the November 35 calls were trading at 2 1/4 ($225), while today they were at 3 3/8 (337.50).