JDSU’s Been A Black Hole For The Telcos, But Creates Some Nice Opportunities…Â
The pull of the latest JDS
Uniphase
(
JDSU |
Quote |
Chart |
News |
PowerRating) debacle last Friday continues to weigh on the
phone equipment sector, as all major stocks unlucky enough to be grouped in that
sector remain under pressure. JDSU itself is down $1.21 to $11.23, while Nortel
(
NT |
Quote |
Chart |
News |
PowerRating) is down an astounding $1 to $8.06, Openwave
(
OPWV |
Quote |
Chart |
News |
PowerRating) is down $2.19 and Level 3
(
LVLT |
Quote |
Chart |
News |
PowerRating)
is down $ 1.13 to $6.50.
    Â
These are some pretty ugly sell offs, coming as they do, on the heels of an
extremely bearish Friday. We like a number of strategies to take advantage of
this sector-wide capitulation. First, in JDSU, we like buying the September 10
calls for $2.85 and selling the September 15 calls for $.85. Intrinsically, that
$5 bull call spread is worth the $1.23, as the $10 calls give the buyer the
right to buy the stock at $10. That means we’re only paying $.77 in extrinsic
premium to own JDSU from $10 until we cap our upside at $15. A move back to $15
or higher would mean that our $5 bull call spread would be worth that full $5 at
expiration, a $3 return on our $2 investment.
     Â
Another attractive example of a limited risk buying opportunity is available in
OPWV. We could buy 10 of the OPWV August 25 calls for $5.50 and sell 10 of the
OPWV August 35 calls for $2.05, or a net of $3.45 before taking account of
commissions. Thus, we’d have upside participation in OPWV between 25 and 35 (a
$10 bull call spread executed 10 times) for a mere $3,450. If OPWV closes $35 or
higher on August expiration, we turn that $3.45 investment into a profit of
$6.55, or nearly a 190% return.
    Â
Our $ Weighted Put volumes show the following stocks or indices with heavy
bearish sentiment:
Symbol
|
Call
Volume
|
Put
Volume
|
$W
Call Vol
|
$W
Put Vol
|
MNX
|
3,644
|
10,702
|
50,002
|
171,252
|
TLAB
|
1,594
|
13,738
|
3,226
|
161,411
|
DJX
|
2,186
|
25,357
|
2,613
|
78,053
|
OEX
|
3,131
|
4,530
|
17,620
|
68,466
|
EMLX
|
1,820
|
1,443
|
4,554
|
35,496
|
GLW
|
6,854
|
5,959
|
6,337
|
28,226
|
IBM
|
5,716
|
6,141
|
34,490
|
28,071
|
GX
|
11,061
|
5,151
|
11,687
|
22,315
|
MWD
|
2,081
|
3,700
|
5,567
|
19,809
|
(1010WallStreet.com has licensed
the use of Hamzei Analytics proprietary options analytics)