XYZ falls 50% for whatever reason. I am sure the person buying calls would be better off than person buying common.
Nope. Let's say X owned IBM some years ago. Y owned IBM calls. IBM fell almost exactly 50% and stayed there for a year or so. Eventually, after a year or so, IBM came back to where it is now. The X, the guy with the common, still ownes his stock and is ahead of the game. Y, the options guy, lost everything.
Having said that, I am buying calls (leaps) now and it is one of the few times that it is wise to do it. As soon as the market clearly turns up, the option premiums will go up sharply making them too expensive. Since the premiums are directly related to volitility the stocks that move the most become the most expensive options.
JDSU will never see 100 again...
JDSU and AMCC are considered two of the best bets in broadband infrastructure. They have little debt, money in the bank, and are positioned well. Their problem is orders - the telcos stopped building out the internet because of high interest rates and the fact that the FED killed most of their competition so they do not have to build.
This will change over the coming months. IMHO we should have a Czar in charge of making sure we have broadband deploymnet. Most of the other developed nations do (Germany, France, Korea, Japan, etc). The problem is that we have stagnated with regional monopolies who make the most cash by sitting still and collecting subscription fees. |
