By Jud Pyle, CFA, chief investment strategist for the Options News Network

Marriott International ( MAR) is currently down about 1% to $19 in the few hours of trading today, but the rumor mills are churning about a possible buyout. The rumor is that Abu Dhabi-based ADIA is in discussions with Marriott. The rumor is that ADIA is offering roughly $30.50 a share in cash.

Call buyers have swooped in as a likely result of this speculation. The April 20 call has seen more than 10,000 contracts trade vs. open interest of 5,058 contracts. Many of the contracts, which changed hands in a series of small blocks today, went off at a volume-weighted average price of 40 cents per contract.

It is interesting to note that these calls closed at 30 cents on Thursday. The fact that the calls are higher with the stock lower is a great example of what an increase in implied volatility does to the price of an option.

The May 22.5 call option has also been active today. More than 4,200 have traded so far for an average price of around 58 cents. Like the April 20 calls, those calls are higher despite the stock being lower, as they closed 45 cents on Thursday.

Stock down, calls up means higher implied volatility. Given the chance of a takeout up 50%, that makes intuitive sense. The May options could also be active because the company is set to announce earnings before the market opens on April 23.

Call-buying like this does not mean that investors should run out and buy shares. But it is worth noting that there are potentially two catalysts to make the stock jump, that being a potential takeover, or a positive earnings announcement.

Jud Pyle is the chief investment strategist for Options News Network (www.ONN.tv) and the portfolio manager of TheStreet.com Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for TheStreet.com.

Jud Pyle, CFA, is the chief investment strategist for Options News Network. Pyle started his career in finance in 1994 as a derivative analyst with SBC Warburg. After four years with Warburg, Pyle joined PEAK6 Investments, L.P., in 1998 as an equity options trader and as chief risk officer. A native of Minneapolis, Pyle received his bachelor's degree in economics and history from Colgate University in 1994. As a trader, Pyle traded on average over 5,000 contracts per day, and over 1.2 million contracts per year. He also built the stock group for all PEAK6 Investments, L.P. hedging, which currently trades on average over 5 million shares per day, and over 1 billion shares per year. Further, from 2004-06, he managed the trading and risk management for PEAK6 Investments L.P.'s lead market-maker operation on the former PCX exchange, which traded more than 10,000 contracts per day. Pyle is the "Mad About Options" resident expert. He is also a regular contributor to "Options Physics."

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