As Time Goes By


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due to report earnings after the close tomorrow. The shares got smacked
yesterday after news of the Globalstar Telecommunications
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fiasco was disseminated. GSTRF looks to be going down the way Iridium did
earlier this year, CRASHING & BURNING. QCOM will take a charge of about $.50
per share for its participation in GSTRF, but that pales in comparison to Loral
Space & Communications

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, which will likely lose most, if
not all of the $1 billion it sank into the satellite communications company.

generated by Don Fishback’s ODDS

it is true that Globalstar is a Qualcomm equipment customer, the revenues
expected from GSTRF were to have been meager at best. The good news is QCOM is
still positioned to be the biggest winner in CDMA (code-division
multiple access)
. Additionally, QCOM will likely sell 10% of its holding
in SpinCo, the Qualcomm communications semiconductor division, to investors in
an IPO to be completed before year-end. The cash generated by the sale of SpinCo
should be another catalyst to
send shares higher in the first quarter of 2001.

QCOM was trading $76 two days ago, trading in the same $60 – $80 range it’s been
in since May. The Street is looking for $.24 per share, but it may be
a penny better. Without overstating the obvious, the Street has not responded
positively to even great earnings. So how do traders take advantage of higher
volatilities that pump up ahead of earnings? One way is with a simple calendar

Traders will be looking at buying the December 70 calls for 7 1/2 (88% volatility) and
selling the November 70 calls for $5 (102% volatility). Their net debit will be just $2
1/2 ($250 per contract). If QCOM sits and the volatility comes down to its
average 75%, the November’s would get cracked, expanding the calendar spread
to $3. If QCOM rallied to $72, the same would be true.

As in any calendar spread, everyone will be waiting for time decay to kill the near-term
option, while the longer-term options decay at a slower rate. In the best of all
worlds, QCOM would go out at $70 at expiration and the calendar spread could
expand to $5.

*NOTE: We wrote this with
QCOM trading at $67. If later in the day, QCOM were trading at $70, perhaps we
would look at the $75 calendar spread.