Options in Nasdaq's Go-Go Group Get Pricey

Playing stocks like Qualcomm or JDS Uniphase in the options market is going to cost you.
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In simpler times, when stocks got unusually expensive, savvy investors would seek to sell the shares, take their gains and replace them with call options to get a cheap play on any further upside.

Ahh, how many must long for those simpler times. Especially, it would seem, investors who own


(QCOM) - Get Report

, which has slugged through strike price after strike price during its unlikely rise to 500.

Trying to do what pros label a replacement strategy with Qualcomm by buying one January 500 call option costs 52 ($5,200), approximately the cost of 100 shares of companies such as

Bank of America

(BAC) - Get Report



(F) - Get Report

or brokerage

Donaldson Lufkin & Jenrette


. "What's that, a stock price or an option price? That's a lot of money to put up for an option," said

CIBC World Markets

options strategist Michael Schwartz. "A replacement strategy becomes an expensive proposition."

That didn't stop some buyers, who anted up for the January 500s and sent volume to more than 1,000 contracts this morning as the stock rose 3 5/8 to 500 1/2.

Since call-buyers profit when stocks rise, they frequently use an options purchase to stay invested through a volatile period for a stock they like. Since they're risking only the premium for the options contract, it actually seems safer in some cases to use the derivative than to stick with the underlying shares. But when premiums get high, that equation changes, and that's exactly what's happened with some of the


new go-go set.

Premiums were similarly inflated in

JDS Uniphase


, where the March 270 and 300 calls traded more than 2,000 contracts each, as that highflier was trading up slightly to 280.

The March 270 calls, for instance, were trading at 53 ($5,300), up 8 7/8 ($887.50), and the out-of-the-money March 300 calls traded up 3 7/8 ($387.50) to 38 7/8 ($3,887.50) by midday.

"The premiums don't mean anything. The stocks are very volatile, so naturally the options are going to be high-priced," said Jay Shartsis, the options strategist at

R.F. Lafferty

, a New York brokerage.

Shartis, who is often found rummaging around in the bear camp, said an expansion in call open interest -- the number of options originated -- could signal a new stage for the group. "It could be the end of the belief stage in these stocks, but people may want to stick around in the options."

Call-buyers took the floors to snap up out-of-the-money calls in

Apria Healthcare


and appear to be expecting some kind of pop.

With the stock flat at 15 15/16, volume in the March 17 1/2 and March 20 calls hit 1,800 contracts in what could have been a spread, a strategy in which an investor sells one options contract to defray the cost of another.