Exchange to Probe Surge in Nortel Options

The Chicago Board Options Exchange is probing a surge in trading of Nortel Networks options Thursday, before the biggest maker of fiber-optic equipment forecast a first-quarter loss.

Trading in a so-called put option that gives investors the right to sell Nortel shares for $30 each through mid-March, for example, skyrocketed Thursday about an hour before Nortel released its earnings guidance. Purchasers of those options have profited immediately, with Nortel shares on Friday losing almost one-third of their value, falling $9.75 to $20.

More than 11,000 of the March $30 put contracts changed hands Thursday between 3 p.m. and 3:15 p.m. New York time, according to Bloomberg data.

Fewer than 1,600 had traded during the previous 5 1/2 hours.