Dykstra: A Marvellous Call on Semis

Before we get to the new pick this morning, I want to update my Komag(KOMG Quote) buy order of 20 September 25 calls (QKXIE), moving the price to $1.65.

I noticed that not all of the good-till-canceled buy orders at $1.50 got filled on Friday. We have almost four months until expiration, and the risk-to-reward makes sense with almost 30% of the shares sold short on a stock with a float of only 22.70 million shares. If a short squeeze takes hold on this one, look out! This stock could bounce back to $30 before you can say boo.

Now for today's stock: Marvell Technology(MRVL Quote).

Great candidates for deep in-the-money calls often include value stocks as well as beaten-down growth stocks. Ideally, when using DITM calls, I want to find stocks where the premium is about $1 or less, that provide four to seven months to control 1,000 shares of the common stock. (Simply put, premium is calculated by adding the strike price -- $12.50 in this case -- to the price paid for the deep-in-the-money call, or $3.70. Then take the total, $16.20 on Marvell, and subtract the cost of the stock, $15.51, and you have the premium: 69 cents. Anything less than $1 for the ability to control the stock between four and seven months is just plain awesome. Last thing, please use a limit order.) ...