It is legal to trade on the basis of rumors, so long as the trader has not learned from an insider that the rumors are true. There is no indication that Mr. Lazio's investments attracted the attention of the S.E.C. at the time. He described the investments in financial disclosure forms in 1998 and they drew no publicity until they were mentioned in an article in Newsday last Sunday. The commission usually begins such investigations when trading volume and price movement before a deal is announced makes it clear that word of the deal had leaked. But such a circumstance was not present in this instance, trading records show.
Options are speculative investments because they have only a limited life.
The option Mr. Lazio bought would have expired worthless if the stock did not rise before Oct. 17, 1997. It was the first time he had ever added to an existing holding since joining the House in 1993, records show. On Sept. 17, the company announced that it was being acquired by Fleet Financial Group. Ask questions about National News and tell other readers what you know in Abuzz, a new knowledge network from The New York Times.