TLAB Option Opportunities Abound

Seriously though, Tellabs
(
TLAB |
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trading $40.5 back on May 25, but is swimming with the carp now,
bottom feeding at a mere $16.08 per share. Now all of us know its more common
than not for a stock to lose 25% of its value when they warn that sales and
earnings will be less than Wall Street expects. However, we are talking about a
company with $500 million in sales for the quarter, revenue of $3.4 billion last
year and presently trading at fresh five-year lows!

Apparently the option investors agree with me, as despite the horrific selloff,
the August 15 puts are offered for $1.50! If the world thought this company was
going out of business, those puts would be bid $2 1/2 to $3. Here are two ways prudent investors
are getting in at these prices and play for a rebound:

If they want defined risk (always a good thing!), they could buy the TLAB at
$16.08 and buy the TLAB Aug 15 put for $1.50. If TLAB tanks below $15, they have
their insurance in place in the form of that put and lots of upside should the stock
make a comeback.