Pick your romances wisely, and beware the heat of merger-and-buyout fever that can fade in a flash.

So much boiling speculation in Newbridge Networks ( NN) ahead of a long-rumored buyout resulted in the stock tanking 1 13/16 to 32 9/16 Wednesday when the actual deal was announced. March 35 call options, the logical play for speculators expecting a deal, shed 2 3/4 ($275) to 1 ($100) as a result. So much for the joy of options, huh?

Volatility Index
Today % Change
27.25 -1.09
Source: ILX
Still, on a day when deals were everywhere, there were hints in some companies' options that could have given some investors clues on the deals more likely to happen.

Put/Call Ratio
Today (Noon) Previous Close
0.36 0.38
Source: ILX
Take a look at the call options in Mirage Resorts ( MIR). The gaming company Wednesday got an unsolicited $17-a-share bid from MGM Grand ( MGG), and Mirage stock has definitely perked up on the news, 3 1/8 to 14.

But over the next few months, fewer traders seem willing to wager the deal will go through. Take the April 15 call options on Mirage; the owner of this call option holds the right to buy Mirage stock at 15 in April. They were trading up 13/16 ($81.25) to 1 1/16 ($106.25), a big move, but if the deal gets done at 17, there would be a $2-a-share premium. In essence, they're dirt cheap.

"Those April 15 calls are just not being priced out as much as they should," said Michelle Skupp with Miller Tabak options trading firm in New York, adding that the price offers a big hint that buyers of these options aren't willing to pay up in full for a bet the deal will go through.

They likely understand that Mirage's flamboyant chief Steve Wynn "is not likely to want to sell," Skupp adds. In the current, or front-month, options, the most active are the March 10 calls, up 2 13/16 ($281.25) to 4 7/8 ($487.50) at midday.

Skupp outlined a short list of call-buying she's been watching: Hollywood Park ( HPK), Becton Dickinson ( BDX), Cordant ( CDD), all "discount value names, with high yields, that no one seems to want."

On Mirage-MGM, Tom Burnett with Wall St. Access feels that in a highly regulated industry, it's easy for an unwilling target like Mirage to throw up roadblocks to a deal. "Wynn could go to the gaming commission, claim it's bad for the industry, bad for the job and tax rolls. Wynn will say 'shove off.'"

Nonetheless, Burnett agreed that "deal flow is breathless right now," and he said there's plenty of premium to be had in M&A in the financial sector.

"I'm shocked at how little activity there's been, particularly with the elimination of Glass Steagall. The high-interest-rate policy has decimated the sector, and good companies have traded even lower because there's been no takeover activity." He pointed to Allstate ( ALL), Summit Bank ( SBGA), First Tennessee ( FTN) -- "This is the unsung story. Banks were waiting for Y2K to pass to do any deals; pooling is going away, and there's bound to be some activity," he said. "And I'm not even long these stocks."

And among the most active deal-related options Wednesday were in America Online ( AOL), the M&A story of the New Economy. Roughly 10,000 March 50 calls traded for 6 3/4 ($675), up 3 1/2 ($350).

Bullish comments out of Merrill Lynch on AOL and Time Warner ( TWX) worked their magic on the Internet sector and the stock, which bounced out of its valley, up 5 7/16 to 55 1/16 on word that maybe the marriage to Time Warner wasn't so bad after all. Paul Foster of 1010WallStreet.com in Chicago predicted Wall Street brokerage houses would rally around AOL and kick the stock back to life.