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Wireless Options Plays Mimic Sprint's Slide

Remember when the market loved wireless?

That was before this morning, when



warned that it would fall short by about 4 cents on its third quarter earnings estimates. The stock got $1.38 knocked off it to hit $26.88 at midday.

Options traders made like lemmings, apparently selling Sprint call options against the possibility of the company bouncing back in the short-term. Almost 6,000 of Sprint's October 25 calls changed hands in morning trading, but it was likely that volume came from a larger trade that also included similar positions in its November call options.

In its November series, call options at the 30 strike prices posted volume of around 6,000. The trade could have been an investor taking a long position on Sprint by buying November calls and selling the October calls to defray the cost.

Call option sellers get paid to take on the obligation of delivering shares of the underlying stock, in this case Sprint, if the call ends up in-the-money (that is, with a strike price lower than the current share price). That makes call selling a bet against the stock rising because the sellers want to keep the premium they get for the option and have it expire worthless (with the stock at a lower price than the strike price of the option).

AT&T Wireless


was seeing action very similar as traders' ill-will extended through the sector.

Nasdaq market-making firm

Knight Trading


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saw takeover speculation rekindled by an article in trade rag,

The Daily Deal

this morning.

The story said the firm had hired investment bank Roberston Stephens to advise it on takeover bids. That was enough to goose the stock $1.69 to $37.19 in morning action and bring out the call buyers who use options to get appreciation from the rumors.

Almost 1,600 of the October 35 calls traded early on, sending the contract's price up 7/8 ($87.50) to 4 5/8 ($462.50) and the October 40 calls' volume reached about 3,000.

Could rising oil prices, a sinking Euro, and some scary earnings warnings be bringing out the gold bugs?

Amid today's options volume leaders like


(MSFT) - Get Microsoft Corporation (MSFT) Report

and Sprint was

Newmont Mining

(NEM) - Get Newmont Goldcorp Corporation (NEM) Report


Well, it's more likely, actually that Newmont's cameo appearance among the volume biggies was caused by investors selling call options as gold prices sagged some this morning after a Bank of England auction.

With Newmont shares down .19 to 17, its October 17 1/2 calls traded about 4,800 contracts, falling 1/8 ($12.50) to 1 ($100) at midday.