Put Buyers Storm Mister Softee as Nasdaq Shudders

Naysayers play Microsoft in size amid a tech stock pullback.
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Options traders in technology stocks took their gunposts Tuesday, with the most active warriors battling in

Microsoft

(MSFT) - Get Report

, which was getting hammered despite a strong earnings report.

"There's also a bit of a bias toward selling, which is probably technically oriented ahead of the Humphrey-Hawkins testimony" by

Fed

Chairman

Alan Greenspan

, the head of one institutional options trading desk said on a morning that was painful for

Nasdaq

traders.

He pointed to a few smaller sales in the oil services index options, which generally serve as a hedge against inflation. "Inflation numbers have been friendly, but the market's got a little complacency to it with all these great earnings reports," the trader said. "Microsoft and

Intel

(INTC) - Get Report

, for example, can't seem to get out of their own way. There's so much positive news on these bigger stocks, people are buying on the rumor and selling on the news."

It was Mister Softee that best illustrated the texture of the Nasdaq today. Microsoft, down 4 7/16 to 94 7/64 at midday, was among the options plays churning up the heaviest trading as the Nasdaq fell more than 80 points.

In the Microsoft options, the August 100 calls that looked so good just a few days ago fell 1 15/16 ($193.75) to 1 13/16 ($181.25) on volume of 9,481 contracts.

The put buyers jumped in as well, snapping up the out-of-the-money August 90 puts. Volume on that contract raced above 2,600, carrying the price up 5/8 ($62.50) to 2 1/8 ($212.50). The August 95 puts also jumped as the stock price fell. Premium on those contracts ran 1 3/8 ($137.50) to 4 3/8 ($437.50) on volume of almost 3,000.

Among the more active options on the oil-services index, which trades as the OSX on the

Philadelphia Stock Exchange

, were the August 80 and August 95 calls, down 1 ($100) to 4 ($400) and 3/8 ($$37.50) to 5/8 ($62.50), respectively.

The OSX was down 1.08 to 78.18 after oil executives indicated prices may fall if

OPEC

hikes its production targets at the next meeting in September.

Pump It Up

Put options in

Sabratek

(SBTK)

grew richer Tursday, with the August 20 puts gaining 1/4 ($25) to 7/8 ($87.50) on volume of 1,000 contracts and open interest of 312. August 25 puts were up 5/16 ($31.25) to 2 3/4 ($275), but on thin volume.

TheStreet.com

columnist

Herb Greenberg

this morning

highlighted some recent filings by the maker of medical infusion pumps. The stock, meanwhile, was down 1/2 to 26 1/8.

Chasing the Bank Stocks

Ahead of Humphrey-Hawkins testimony, the bank stocks generally sagged, but a hefty straddle trade in banking giant

Chase Manahattan

(CMB)

crossed as the stock bucked the sector and rose slightly, up 13/16 to 82 15/16.

Roughly 1,500 contracts in September 85 puts and calls crossed within a few minutes, the calls at 4 1/8 ($412.50) and the puts at 5 5/8 ($562.50), as an institution played for a drastic post-Greenspan move.

Catch father-and-son options traders

Thomas DeMark

and

Thomas DeMark Jr.

in a live Yahoo! chat at 5 p.m. EDT Thursday.

Their new book,

DeMark on Day Trading Options

(McGraw-Hill, 1999), shows how to use options to cash in on the daytrading phenomenon.

Register for the free Yahoo! chat at

chat.yahoo.com.

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