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Pros Stalking Call Options on Hopes That Nasdaq Rebounds

Some smart money thinks the Nasdaq train wreck may have some well-priced survivors.

Get back! Get back! Get back to where ... the Nasdaq was before a December short squeeze shot it to the moon.

Amid the two-day carnage in Nasdaq stocks, some money managers say they're waiting to cherry-pick some of their favorites, while keeping an eye on the bloodbath.

"We're scouring among the Internets, or the Internet-related stocks holding up well today that we like for the long run," said Rob Sorrentino, with whom we spoke

Tuesday evening at his firm,

Sorrentino Asset Management


By Wednesday, no one appeared to be jumping in all that quickly, but they were waiting for the right time to buy. As for the Nasdaq strength, "I just don't think it will end that quickly. My big positions I had put floors under with put options," said Jordan Kahn of

Kahn Asset Management

in Los Angeles. "Those are actually helping me hang in there."

Kahn has been looking to buy Nasdaq mo-mo issues that have had big run-ups but which he likes on a fundamental basis, in particular

Foundry Networks



Brocade Communications


. "Unless you were in these already, you can't get in them until they get knocked down to more realistic levels," Kahn said. "These companies are in the sweet spots of technology -- enabling faster broadband, better fiber-optics -- and the fundamentals are there for them."

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Kahn is still holding on to options positions he put on for some of his biggest technology positions -- he sold calls on


(QCOM) - Get QUALCOMM Incorporated Report

and bought puts on

JDS Uniphase


when the stock was at 180, and

Veritas Software

(VRTS) - Get Virtus Investment Partners Inc. Report

. "We've had a big enough down day that the options went into the money relatively quickly."

Call options are contracts that give the buyer the right to buy the stock -- usually 100 shares -- at an agreed-upon time and price in the future. Options investors can also sell calls against stock they hold in their portfolios -- a strategy known as "covered call writing" -- to add to their returns.

Puts are options contracts that give the buyer the right to sell stock at an agreed-upon time and price in the future. Often they are used as hedges for volatile stocks.

As for the market, "We've yet to see a good reason for the selloff; it's not like the Asian crisis. So that's why once selling gets out of the way, we'll get some more strong moves in technology," Kahn added. "This breather is a healthy pause and I'm keeping a list of stuff I didn't get last time. As for calling bottoms, I'd rather miss a little

upside and wait for a firm bottom to be established."

As for the Nasdaq poster-child, Qualcomm options are in a reversal of fortune --at least for the moment. The Mighty Q's stock is down 11 1/2 to 150 15/64.

At the end of the year, January 640 calls were trading at 101 ($10,100). Since the 4-for-1 stock split, those same options would be January 160 calls worth roughly 25 ($2,500). As of Wednesday's shipwreck in the Nasdaq, those January 160 call options were trading at 11 7/8 ($1,187.50) on the




exchanges, and at 9 7/8 on the

American Stock Exchange


Among the most actively traded Internet options was, oddly enough,


(VRSN) - Get VeriSign Inc. Report

, which was down 27 1/4 to 161 1/4. The June 155 calls had slid 21 3/4 ($2,175) to 46 1/2 ($4,650) on volume of more than 1,500 contracts.

And the "Eveready" option of 1999, the


(QQQ) - Get Invesco QQQ Trust Report

, was logging some heavy trading in the January 145 puts. That contract scampered up in price Wednesday 3/16 ($18.75) to 13/16 ($81.25).

Shares of the

Nasdaq 100

unit trust, which trades on the Amex under the symbol QQQ, were down 3 5/8 to 172 7/8.