Rumors Keep Options Traders Cooking

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Triple-witch, impeachment, potential war with Iraq. Does any of that matter to the options market today?

It would be an overstatement to say none of it matters, but the orders of the day seem more attuned to rumors than anything else. Industry wiseguy Michael Schwartz of

CICB Oppenheimer

cracked that the immediate future will determine "whether President


is a December option or a perpetual one." Yet, despite the political uncertainty that could damage the overall market, trading floors in Chicago, New York and Philadelphia have given rise to rumors about several stocks, some major and some minor, but all portending significant moves.

"There are rumors created by news -- such as

Consolidated Cigar

(CIG) - Get Report

-- and rumors created in the absence of news," said Larry McMillan, an independent options analyst based in New Jersey. Consolidated Cigar, which had announced that it was seeking ways to increase shareholder value, said that it had reached an agreement to be purchased by France's


for more than 17 a share.

It was the latest options rumor to turn into fact, and traders turned their attention back to the oil sector, where



attracted some out-of-the-money call volume. With the stock up 1 1/2 to over 35 on the day, a buyer took a shot at 300 of the January 40 calls for 3/4 ($75). "It could be speculation that because



doesn't want to be taken over, it would make an acquisition, and Pennzoil is a possibility," said Paul Foster of

in Chicago.

Back in the City of Brotherly Love,

Home Depot

(HD) - Get Report

options were unusually active in a rather unusual strike price.

With the hardware and home supply giant down 5/8 to 53 5/8 at midday, a call buyer took a 3,500-contract position in the December 55 calls, paying about 3/4 ($75) for the play. The action caught the attention of traders because it represented more than double the open interest on the options.

Philly traders said that a positive comment on the sector from


and rumors that an

S&P 500

rebalancing would benefit Home Depot shares were potential drivers for the volume. Still, Home Depot shares would have to jump more than $2 each before the end of trading Friday to make an exercise of the options successful. Implied volatility is in the mid-50s, in the high end of Home Depot's range, traders say.

On the negative side of speculation,

American Greetings

(AM) - Get Report

was down 1/2 to 37 5/16 today, but one trader was apparently willing to pay up for some puts on the company.

The in-the-money January 40 puts traded 30 contracts, the only real volume in the company today, but cost 3 3/4 ($375), a 1 9/16 ($156.25) jump for the session.