Pros Use Calls for Last Run at Nasdaq Sizzlers

It's time for the last window-dressing of 1999 as call options on JDS Uniphase fly.
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Get your window-dressing here!

Some of the most expensive stocks, in particular

JDS Uniphase

(JDSU)

, are seeing last-minute 1999 buying in their call options.

A call is a contract that gives the buyer the right to buy stock at a predetermined time and price in the future.

JDS Uniphase's stock price has gone to the moon this year, but that didn't stop investors from buying call options in bunches, especially the March 340 call options. With the stock up 12 1/2 to 347 3/4, Wall Street appears willing to pay anything to make sure shareholders see JDS Uniphase bloat on the books as of year-end.

"This is a quiet panic rush to get in to stocks like JDS and

Qualcomm

(QCOM) - Get Report

," said Ron George, co-manager of the

Sorrentino Asset Management

hedge fund. "If you're a money manager, you've got to show that you own it. It's insanity run amok." George's firm invests primarily in index options, and he has no position in Qualcomm.

Meanwhile, JDS Uniphase's in-the-money calls -- those with strike prices lower than the current stock price -- were fetching 58 3/4 ($5,875), up 3 1/2 ($350); two large trades of roughly 2,600 contracts in the March 340 calls crossed on the Chicago and Pacific exchanges on Tuesday.

George said he expects to see some mispricing of

Nasdaq

options during the next few months. "You'll get pricing of the out-of-the-money calls massively out of line with the puts," he predicted. Call options are out of the money when their strike prices are higher than the current underlying; puts when their strike prices are lower than the current stock price.

Meanwhile, "there could be another boom in the Nasdaq in the fourth quarter, and earnings could be gangbusters. But all it's going to take is a shift in the psychology of one key stock to end the rally," he said. "And I don't think it will happen until the end of the first quarter," when companies are going to have a hard time repeating their stellar fourth-quarter results. "That's when we may have some problems."

In a name not usually heard from in options,

Powerwave

(PWAV)

boasted a trade of 2,000 February 70 call options. Prices for the options averaged 2 3/4 ($275) per contract. Open interest in this strike price -- that is, the number of option contracts already "opened" by investors -- totaled just over 5,000 contracts.

Powerwave stock is up 5 7/16 to 55 3/4.