Take Profits In TCM And AVCI — Establish New Play In BRCM 

• March 7, 2001
• Jon Najarian

The market seems ready to continue the recent rally, but overhanging worries
about what Yahoo!
(
YHOO |
Quote |
Chart |
News |
PowerRating) might say
tonight has smart money staying on the sidelines. We’ve seen some pretty
bearish action in Broadcom
(
BRCM |
Quote |
Chart |
News |
PowerRating), but
that’s to be expected, what with the earnings projections and downgrades by
several Wall Street analysts.

Nonetheless, we actually like a relatively
conservative buy-and-hold strategy for the battered broadband digital-transmission specialist. Right now (12:15 pm CST)
traders can buy BRCM stock for 41 1/4 and sell the August 45 calls for $10. A customer would only have to put up
$31 1/4 ($41 1/4 – $10) to establish the trade and thus, would be protected by the
sale of the Aug 45 call against another 24% slide in the underlying stock. A
rally to anywhere above $45 by August expiration (164 days from now) would
result in a return of 44%! Let’s see, 24% protection to the downside and we
make 44% if the stock rallies just 9%? Sounds like a winner to us.

Our January 22 market calls on TyCom
(
TCM |
Quote |
Chart |
News |
PowerRating) and Avici Systems
(
AVCI |
Quote |
Chart |
News |
PowerRating) have
really been paying dividends lately*. We’re
closing both shorts and looking for fresh meat, as we don’t know of any
additional catalysts to drive these two much lower. TCM has slipped from
$25 TO $18.74 and AVCI has slumped from 30 1/2 to $15.

*(We’re
also following the action in TyCom
and Avici
Systems,
as both have significant amounts of shares available for sale as their lock-up
agreements are expiring. AVCI traded up to 32 7/8 this morning, but has
fallen down to 30 1/2 (11:45 CST). There appear to be lots of interested put
buyers and call sellers in its options (QYV). AVCI comes off its
lock-up tomorrow, so perhaps the action signals a move back to the $18.50 – $20
range it hit two weeks ago.)

Bearish Option Action Today:

Symbol

Call Volume	Put Volume	$W Call Vol	$W Put Vol
BRCM	8,868	12,813	30,669	94,699
SPX	16,862	21,041	665,063	2,076,838

Bullish
Option Action Today:

color:black”>Symbol

color:black”>Call Volume	color:black”>Put Volume	color:black”>$W Call Vol	color:black”>$W Put Vol
color:black”>PALM	color:black”>9,534	color:black”>1,213	color:black”>25,236	color:black”>3,810
color:black”>GTW	color:black”>7,662	color:black”>1,444	color:black”>19,724	color:black”>3,993
color:black”>QQQ	color:black”>68,009	color:black”>15,562	color:black”>177,597	color:black”>41,382
color:black”>VRTS	color:black”>4,434	color:black”>808	color:black”>29,091	color:black”>7,905
color:black”>SUNW	color:black”>12,914	color:black”>1,765	color:black”>27,013	color:black”>7,746

(1010WallStreet.com
has licensed the use of Hamzei Analytics LLC proprietary options analytics)