The tale of two markets continues.
In daily option trading, Cabletron Systems' ( CS) out-of-the-money calls grabbed some attention. Out-of-the-money calls, which have a strike price higher than the current share price, are useful as speculative bets on a merger or a buyout at a price higher than where the stock is trading. With Cabletron shares up 4 1/2 to 40 1/2, the company's March 45 calls rose 1 3/16 ($118.75) to 1 1/2 ($150) on volume that surpassed the open interest of 450 contracts. Option traders may be speculating that Cabletron may be under pressure to sell itself in the wake of Alcatel's ( ALA) acquisition of competitor Newbridge Networks ( NN).
Also on the Nasdaq front, word on the trading floor was that the Chicago Board Options Exchange is surveying traders about splitting the NDX contract. The index itself was lately up 9.99 to a massive 4180.08. Splitting the NDX, or any large option contract, would be done to generate heavier volume into the contract. With the Nasdaq growing in popularity, a less expensive contract could generate more interest from individual investors. A spokesman for the exchange said he couldn't immediately comment on rumors of the split.