Options Buzz: American Standard Takeover Chatter; Drug Stock Options Busy

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Is

American Standard

(ASD)

up for grabs? The New Jersey-based conglomerate, which makes everything from toilet bowls to industrial air conditioners, has seen relatively high volume in its at-the-money calls today, prompting the takeover speculation.

Paul Foster, the options strategist at Chicago-based

Mercury Trading

, said he is giving the rumor "about 10% credence" at this point. This morning, a trader moved in on 200 of American Standard's December 40 calls. The company's January 50 calls, which are showing open interest of 88 contracts, traded about 50 contracts later in the morning.

Smith Barney Salomon

analyst Jim Samuels said he hadn't heard any new takeover rumors concerning American Standard but that the company had been seen as a target since a fruitless bid by

Tyco

(TYC)

to acquire the company last year.

Pharmaceutical side effects aren't restricted to patients. Today, as

Warner Lambert

(WLA)

shares crumbled, falling more than 23 in early trading, options activity seeped into

Bristol Myers Squibb

(BMY) - Get Report

and

Pfizer

(PFE) - Get Report

.

Pfizer fans were moving into the December 80 calls today, accounting for volume of more than 1,200. On the strength of a

Merrill Lynch

upgrade, the shares jumped 3 1/8 to 75 7/8. The out-of-the-money December 80 contract more than doubled in price this morning. Its at-the-money strike is also seeing strong volume today.

Warner Lambert is suffering under reports that its diabetes drug

Rezulin

is prompting recommendations that doctors monitor users closely for signs of liver dysfunction. Earlier today,

Glaxo

(GLX)

, which markets

Troglitazene

in Britain, announced that it was suspending sales of the drug.

Bristol Myers, which makes a competing drug,

Glucophage

, stands to benefit from any dropoff in Rezulin's performance. Possibly as a result, options activity is swirling around its January 95 calls, sending volume over 6,000 in morning trading. Bristol Myers shares were trading at slightly more than 95. Mercury's Foster, however, also pointed to a recent Smith Barney report that advised investors to swap positions in Merck for Bristol Myers shares. The options activity today, according to Foster, could have been a large covered call writer seeking to protect gains in Bristol Myers.

In other options activity:

The Nikkei's 371-point rise last night sparked heavy trading in the

American Stock Exchange

Japan index contract (JPN), which stood at 174.8, up 3.8. The December 190 strike traded more than 2,100 contracts and also doubled in price by midday.

Friday's takeover darling,

GTE

(GTE) - Get Report

, hasn't seen much share price appreciation today, but the December 50 call contract was flying off the shelves, as volume hit 1,500. GTE's shares are up 5/16 to 50 7/8 today.

Tech stock options continued their out-of-the-money march. Usual suspects

Compaq

(CPQ)

and

Intel

(INTC) - Get Report

led the way. Compaq, which saw an early 2 point rise in its shares to 64 9/16, had strong volume in both its December 65 and December 70 call contracts. Traders targeted Intel, trading slightly over 79, at the December 80 and 85 strikes to lead American Stock Exchange options trading, as usual.