SAPE Options Look Ripe For The Picking…
There was a ton of interesting action in the options
markets yesterday. The implosion of Nortel
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across the floor. As we noted, the volatility in JDS Uniphase
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I always tell our traders that when all news is perceived
as bad news, we’re in a bear market. Clearly to any of us trading in these
wild days, the sentiment is BEARISH. In particular, the technology sector has
not responded positively to great earnings. Sure, there have been the dead-cat
bounces in Microsoft
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Due to the market’s reaction to the vast majority of tech
announcements as a selling opportunity, I looked for an opportunity in the tech
sector and this morning found e-service consultancy firm Sapient
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PowerRating). In the
past two weeks, the stock has rocked from $27 to $45.75 and back to $30. Pretty
volatile stuff, but despite those moves, the implied volatility for December
options is just 114%, right at its one-month average! As with Nortel, I would
have expected the volatility to be considerably higher ahead of an earnings
announcement. In fact, the December 30 straddle is trading for just 10 1/4, while
the November 30 straddle is trading for 10!
They will declare their earnings after the close today, and
if revenue misses our target of $135 million, or earnings of $.13, they’ll
hammer this one just like Nortel
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PowerRating). Advanced option players will be
looking at buying 3 December 40 calls against selling 2 December 35 calls. This back spread
would take advantage of a pop to the upside, or a disappointment if SAPE misses
its targets. Prices they’ll be looking to pay are 2 1/4 for 3 December 40’s and
selling 2 December 35 for 3 1/4, with the stock trading 30 1/4.
“Times New Roman”;mso-ansi-language:EN-US;mso-fareast-language:EN-US;
mso-bidi-language:AR-SA” Times>The call-in number for their announcement at 4:30 pm is
212-896-6107.