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Tech Stocks Lure Investors Into Options

If a rally's on the way, some options players are getting in position.

Perhaps it's the calm before the storm, or maybe investors are sensing a tradable rally in the offing. In either case, tech stocks quietly drew investors back into the options market in Big Mac style with some super-sized orders in

Oracle

(ORCL) - Get Oracle Corporation Report

hitting the floors.

"Someone was in Oracle getting in and out of June 25 puts in a big way," said Scott Fullman of

Swiss American Securities

. Roughly 11,100 contracts in the June 25s traded against open interest of 15,758; the price was up 5/16 ($31.25) to 11/16 ($68.75) per contract. Oracle shares were down 15/16 to 27 9/16.

As a whole, the market seems to be held hostage by the bond market, according to Gary Semeraro with

SG Cowen

. "There's not a lot of conviction out there," he said. "In the past, when the option market doesn't have conviction, volatilities tick up. But that's not really happening this time."

In early trading, hardware stocks dipped after

Donaldson Lufkin & Jenrette

issued a

report indicating that earnings estimates in the sector might not account for a possible spending slowdown. However, the negative news didn't seem to affect tech-related options.

"We've had accounts who've been bearish forever on technology starting to buy," said the head of one New York institutional options desk. "And don't ask me why now. They're buying into tech, pure and simple."

Elsewhere in tech and telecom, a federal court

ruling in Oregon helped put the brakes on cable shares Friday when it ruled that the city of Portland can make

AT&T

(T) - Get AT&T Inc. Report

let competing Internet companies use cable lines it owns as a result of its merger with the former

Tele-Communications Inc.

Nonetheless, options investors continued to bounce in and out of cable company

MediaOne

(UMG)

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.

Goldman Sachs

and

Salomon Brothers

were said to be the dealers in size in Media One options.

Several large blocks of MediaOne stock crossed earlier in the week, and among the most actively traded options were the July 75 calls, with 7,607 contracts traded. The price tag on the July 75s reached 1 11/16 ($168.75), up 5/16 ($31.25) by midday. The company's June 70 and 75 calls also saw trades of roughly 1,000 contracts.

Also topping the most actives were June 35 calls in

Alza

(AZA)

, which was moving in the face of two meetings with federal regulators Tuesday.

Early Tuesday, Alza won panel support to expand the approval for its drug

Doxil

to treat ovarian cancer patients who relapsed or didn't respond to common therapy. The

Food and Drug Administration

will consider the panel's recommendation when it makes the final decision about the drug, which is expected by the end of the month.

"There's another meeting in the afternoon which could bring people back in to cover themselves," said one Philadelphia-based trader. "There were also rumors

Abbott Labs

(ABT) - Get Abbott Laboratories Report

might buy somebody in Alza's business, and people are definitely playing it up like there will be some event."

With the stock up 5/8 to 39 1/2, June 24 calls in Alza slipped 3/4 ($75) to 3 5/8 ($362.50) per contract on volume of 1,285 as volatility came in.

Among other drug stocks,

Amgen

(AMGN) - Get Amgen Inc. Report

"was really active, with a big trade on the July 75 puts into the January 55 and 60s. My thinking on this is someone is taking a profit and getting out, possibly to get into those different strikes," said a floor trader in the options. Amgen shares slipped 1 to 59 11/16.