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Options in Motion: Elan

Its January puts see heavy trading.
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Option volatility jumped as traders focused on Hurricane Rita, some weak retail numbers and higher interest rates.

The CBOE Market Volatility Index (VIX), which is based on the implied volatility of the

S&P 500

options and is used as a gauge for fear in the market, was recently up 7.28% to $13.56. The CBOE Nasdaq Volatility Index (VXN), which measures the implied volatility of the Nasdaq 100, was recently up 2.9% to 15.61.



topped the most-active list for options after the drugmaker and



said they expect to complete their safety review of Tysabri in the coming weeks. A bulk of the trading was taking place in Elan's January 2006 options. The January 2.5 puts have traded 10,000 times; the January 5 puts have traded 16,700 times; the January 7.5 puts have traded 63,000 times; and the January 10 calls have traded 10,700 times. The stock was down 15 cents, or 1.81%, to $8.16.

Biogen saw limited option action on the news. The October 40 calls have traded 3,300 times; the January 2006 40 calls and April 40 calls have traded 4,000 contracts each. The stock was down 83 cents, or 2.06%, to $39.40.



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saw a buyer of the October 3 puts 26,500 times as the stock traded lower. The January 2006 5 calls were sold over 4,000 times. The stock was down 25 cents, or 8.25%, to $2.78.



had two pure speculation trades take place. The October 27.5 calls have traded 12,500 times and the December 30 calls have traded 15,000 times. The 27.5 and 30 calls are both out of the money. A call is considered out of the money if the stock is trading below the strike price. The buyer of these calls is making a cheap bet that the stock will trade higher. MCI was down 13 cents, or 0.51%, to $25.49.



saw some bullish call buying. The January 2006 2.5 calls have traded 11,000 times. Lucent was up 5 cents, or 1.68%, to $3.03.

Sprint Nextel


had the January 2006 22.5/25 strangle trade 11,000 times. This is when someone buys a downside put and upside call simultaneously hoping for a large move in the stock price in either direction. The stock was down 37 cents, or 1.54%, to $23.63.

Avon Products


saw its puts leap in value after the company cut its 2005 earnings guidance. The October 30 puts have traded 1,100 contracts and were up more than 300%. The stock was down $3.78, or 10.72%, to $27.32.