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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank -- Ignore unavailable to you. Want to Upgrade?

To: Jenna who wrote (9796)	5/29/1998 12:59:00 AM
From: Jeff Sutton	Respond to of 120523

U.S. OPTIONS/Bay calls active as rumors swirl Thursday May 28, 8:44 pm Eastern Time CHICAGO, May 28 (Reuters) - Volume in calls on Bay Networks Inc. (BAY - news) swelled on Thursday as implied volatility expanded amid a rumor that the company was the target of a takeover. Takeover talk was widespread on an Internet message board devoted to the company. The company did not return phone calls. Traders said institutions scooped up Bay calls - buying straight calls and doing call spreads - lifting trading volume in Bay options to about three times in average. "We're seeing retail paper in here as well," a broker said. Call volume outpaced put volume by a margin of 10 to one on the Chicago Board Options Exchange. Most of the volume was in the June 27-1/2 and the June 30 calls, with about 7,500 contracts trading in each strike. ''Implied volatility for the June 30 calls was 50 to 60 percent higher than it should be,'' said Jay Shartsis, director of options trading at L.F. Lafferty & Co. "They're all overpriced," he said. Bay has long been the subject of takeover speculation, traders noted. According to the latest talk, likely suitors included Lucent Technology <LU.N >, Canada's Northern Telecommunications (NTL.TO - news) and Sweden's Ericsson (LMEb.ST). ''The word is that (Bay) turned down a $32 (per share) bid,'' a trader said. The underlying stock rose 2-9/16 to 28-7/16. Trading in Cabletron Systems (CS - news) options was buoyant as takeover talk spread through the sector. ''Everyone is thinking consolidation in the sector,'' said options analyst Paul Foster, options strategist and editor of 1010WallStreet.com. Options volume was above average as more than 800 contracts traded in the July 15 calls. Implied volatility for nearby at-the-money options rose into the low 60 percent area, up from its average of around 55 percent, he noted. Cabletron stock rose 5/16 to 13-1/16.