I've been told that since my income is either from a pension fund or exercising of a stock option that I may mot be able to deduct the IRA contributions? is this true?

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If you do not have taxable compensation you cannot deduct IRA contributions on a tax return.

IRS Publication 590-A , Contributions to Individual Retirement Arrangements (IRAs) - https://www.irs.gov/publications/p590a

You didn't say if the options were NSO or ISO. In my opinion, pension income is not allowed, however, income from exercised NSO options is considered "earned income" for tax purposes. You should have received a W-2 from your previous employer. Earned income should qualify as income to contribute to a traditional IRA. Whether that IRA contribution is taxable or non-taxable depends on a lot of other factors. I am not a tax professional, however I had a similar situation. I would still check with a tax professional to be sure.