Jeff,
I have been wondering why would someone gamble 3/4 of a million on those 4000 UQXLQ calls. There were plenty of risks with those calls:
1. out of money ($10 roughly at the time of trade),
2. close to expiration,
3. over bought technicals (at the time of trade).
He has to be damn sure that the stock will be over $90 by expiration to make it worthwhile, considering the cost of the call is about $2.
He held the calls (at least most of them) tight even when price went against him yesterday.
Could it be that he knows some significant news about to be made public? If so, what kind of news would make the stock go north of $90?
Today's Hitachi news was not significant enough IMO to be the '$90 news', even without yesterday's late decline. The widely expected Gateway news, following Dell and Hitachi's, will have even smaller impact. Although it doesn't seem very likely, but if CPQ comes out with a x2 endorsement, the news may potentially be significant enough.
New, higher capacity Total Control products had been rumored recently. But I don't think they would do that much to USRX, aside from helping ASND drop a few points, since they are already expected. ADSL products would not impact revenue enough in the near term to make the price pop over $90.
Another potential and more likely '$90 news' would be for other major modem makers, Zoom, Boca etc., to announce support of x2. This was mentioned in the Motley Fool and Oppenheimer Comdex reports. And there had been earlier reports that Zoom was considering a USR offer. If USR has majority of the secondery modem makers, the Rockwell camp would collaps by itself. You only need a few larger ones like Zoom and Boca to embrace x2 to turn the perception around.
Timing-wise, Zoom etc. can't afford to wait too much longer, as x2 roll out will be happening in a matter of a few weeks. Otherwise, they won't have any product on the shelf when customer come to buy a 56k modem after hearing the phenomenal success of the field trials. The time factor of this senario also fits well with the expiration of the Dec calls.
Therefore, it is purely a speculation on my part that, if the call buyer was betting on some significant news , instead of doing it as part of a complicated options strategy, the news would likely be related to other moden makers. Psychologically, USR already had the major ISPs, some major PC OEMs; it only needs a few other modem makers to pull the rug beneath the Rockwell camp. Then there won't be any uncertainty about whose design will be adopted as standard.
Jianmin
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