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Technology Stocks : BAY Ntwks (under House) -- Ignore unavailable to you. Want to Upgrade?

To: Anthony Wong who wrote (6263)	6/5/1998 4:04:00 PM
From: Anthony Wong	Read Replies (1) \| Respond to of 6980

Options Report:Traders Take Bay Networks Rumor Into Weekend June 05, 1998 3:52 PM By Steven M. Sears NEW YORK (Dow Jones)--Bay Networks Inc. is trading strongly for a second session as Wall Street continues to speculate that the networking-company would merge with Northern Telecom Ltd. With the stock hovering around 30 5/8, most traders are focusing on the June 30 calls, which are down 1/8 at 2 3/8 on volume of 6,336 contracts, compared with open interest of 20,010 contracts. The quantitative signals are still sounding on Bay Networks, suggesting that many traders still believe that something could happen over the weekend. Bay and Northern Telecom declined to comment Thursday. The implied volatility of Bay's options - an indication of how likely the underlying stock price is to move up or down - is holding firm in the upper 80s range, well above historic volatility of 54%. A trader in the Bay Networks options pit at the Chicago Board Options Exchange, where company's options are listed, said that order flow was two-way - suggesting that some people are buying into the rumor, while others who may not believe the rumor are selling overpriced options to speculators. The trader noted that there is a lot of volatility in the June and July contracts, but the two-way paper makes it difficult to tell if something will really happen. "Bay and these types of things have happened over the past four to five years. You've had tons of these potential takeovers. To me, until it happens, we've seen it before. Until the i's are dotted and the t's are crossed, you just trade," the trader said. The Bay Networks takeover rumor has been around for months. It drove trading Thursday and Friday of last week when the market thought the company was about to be bought by Lucent Technologies. At that time, Northern Telecom was considered a possible suitor along with Alcatel-Alsthom, which recently acquired DSC Communications. Needless to say, Bay Networks is still in play. A Dallas-based institutional salesman who deals with a lot of hedge funds said his clients have called about the Bay rumor, but none of them is interested in trading it. "It's a little too juiced up already, and they can't play the options because they're way up," he said. Overall, trading in Bay Networks has slowed since the previous session. More than 25,500 contracts have traded thus far, but that is well below the 50,557 - almost all calls - that traded Thursday. Average daily volume is 10,825 contracts. Elsewhere in the options market: - The Bay View Capital Corp. takeover play crumbled almost as fast as it shot up, illustrating the risks of trading rumors in the options market. Speculators had the company merging with Washington Mutual Inc., sending the stock and options straight up in the previous session. After declining comment Thursday, Bay View issued a brief press release that it is not in merger discussions, though it is in discussions about acquiring a nonbank organization. - First Union Corp.'s are still active and the reasons aren't any clearer. With the stock up 3/16 at 55 1/2, some sizable trades moved in the June and July 55 puts. The June puts are down 3/8 at 13/16 on volume of 1,004 contracts, compared with open interest of 1,366 contracts. The July 55 puts are down 1/8 at 1 7/8 at 525 contracts, compared with open interest of 4,979 contracts.