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CHICAGO, May 2 (Reuter) - Call options in Cypress
Semiconductor Corp saw heavy traffic on the Chicago Board
Options Exchange, accompanied by a surge in volume of the
underlying stock, traders said.
Cypress May 15.0 calls were among the most heavily traded
calls on CBOE, with 4,555 contracts changing hands by late
"Tuesday they bought May 15.0 and they've been buying them
ever since," said John Streibich, a designated primary
market-maker on the CBOE floor. "Today there's been all sorts
of different people buying them."
Premium on the virtually at-the-money option was up 7/16 to
3/4 against a 3/8 rise in the stock to 14-3/4. At-the-money
options have a delta of 50, which means their premium should in
theory move at half the speed of the underlying stock.
Streibich said interest today had spread to June 15.0 and
June 17.5, which had volume of 1,138 and 877 contracts
respectively. The May options did not have the 17.5 strike
Traders said implied volatility for the May 15.0 has risen
to about 60 percent from usual levels of about 48, while most
other strikes were priced in the 50-55 percent area.
Jay Shartsis, director of options trading at R.F. Lafferty
& Co, said trading was fueled by vague rumor that a
microprocessor giant would take over Cypress.
"That's the rumor," he said. "A lot of people are just
buying on the rumor, but I don't know what to make of it
A brokerage firm trader said Cypress had been in the rumor
mills from time to time in the past six months, although none
of the rumors had proved to have any basis.
Streibich noted that a lot of the orders were in big
blocks, which suggested they could be institutional buying.
The first of such big buying came just before the close on
Tuesday, when one buyer took 5,000 of May 15.0 calls, he said.
Elsewhere in the market, high-tech stocks rallied sharply
and stimulated a lot of option flows, most notably in the
networking shares which had been the hardest-hit sector in the
market's March/April decline.
Traders said investor's resurgent interest in the equity
market was spilling into the tech stocks at last.
Cisco Systems Inc options were at the top of
CBOE's most-actives list on both the put and call sides, with
the stock up 3-1/2 at 56-7/8 in late trade.
Calls on Ascend Communications Inc and Cascade
Communications on CBOE, as well as 3Com Corp
on the Pacific Exchange, were also actively traded.
Shartsis said the stock market had rallied this week
despite an open interest buildup in put options on the broader
"Amid all the bearishness, the market has just skyrocketed
straight up," he said. "But that's the way they do it."
Still, he said the market might be due for some correction
-- Shin Kishima/Chicago Derivatives Desk
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