Will AOL buy Nextel?
Friday March 26, 4:37 pm Eastern Time
U.S. OPTIONS/Bid rumors reignite Nextel vols
CHICAGO, March 26 (Reuters) - Traders bid April and May calls on Nextel Communications Inc. (Nasdaq:NXTL - news) higher on Friday as old takeover rumors resurfaced in an otherwise quiet market.
The rumor, which pegged MCI WorldCom Inc (Nasdaq:WCOM - news) or America Online Inc. (NYSE:AOL - news) as a likely suitor, helped drive Nextel stock to a fresh record at 38-11/16. It closed at 37-7/8, up 4-5/16 in heavy trading.
The companies delcined to comment.
Implied volatility, a key factor in determining options prices, jumped to around 72 percent for the April 40 calls, up from an average of around 57 percent.
More than 14,900 calls changing hands versus about 1,600 puts on the Chicago Board Options Exchange.
Trading volume was concentrated in the April 35 and April 40 calls, which registered 2,954 and 4,081 trades, respectively, and in the May 30, May 35 and May 40 calls, which had combined volume of 5,749 contracts.
''Volume is more aggressive than usual, but that's partly because there's nothing else going on today. There are no deals,'' said Paul Foster, investment strategist and editor of 1010WallStreet.com.
Larry McMillan, president of options advisory group McMillan Analysis, characterized the rumor as a ''Friday rumor,'' meaning it didn't seem credible.
''We've seen a lot of these rumor stocks on Friday. It just seems like takeover rumors circulate from one to the other and if it doesn't happen by Monday, everyone bails out and goes on to the next,'' McMillan said.
Not everyone was so skeptical. One trader said he believed the only question was when Nextel would receive a takeover bid, not if it would receive one.
Elsewhere, trading in King World Productions (NYSE:KWP - news) options was brisk on takeover talk.
Trading volume was most concentrated in the April 30 calls, with more than 800 contracts changing hands. Implied volatility on the contract advanced to 68 percent from its average in the mid 40 percent area, traders said.
Overall, call volume outpaced put volume 1,169 contracts to 60.
''It looks like something could be cooking there,'' said Jay Shartsis, director of options trading at R.F. Lafferty & Co.
The underlying stock rallied 1 to 29-15/16
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