Dave,
Good question. Here's an article from Reuters that seems to be one answer. Of course for every bullish Call buyer, there must be a Call seller who is bearish.
Call options limit downside risk to the premium paid, at the maximum, and give some big leverage for any upside. If you accept the risk, you'll want to be beyond the next qtr. reporting period when choosing the expiration. Best to keep your risk capital low on this one, but it looks promising to me. John
CHICAGO, Feb 7 (Reuter) - Options on 3Com Corp were busy as the stock extended its recent decline after a couple of brokerage firms lowered their investment ratings.
At about 1400 CST/2000 GMT, the stock was down 2-7/8 points at 49-3/8 on more than 23.5 million shares. The stock reached a session low of 47-1/4.
Traders said options investors were largely buying calls in the face of the stock's decline.
The 3Com February 50 call traded about 7,850 contracts. The option was down 1-1/2 at 2-3/8 and had open interest of 339 contracts through Thursday.
3Com shares have dropped sharply every day this week. They ended last week at about 67.
On Friday, Cowen & Co lowered its rating on the network systems company to buy from strong buy and Oppenheimer & Co cut its rating to market perform from buy.
Other busy 3Com calls included the February 55, with volume of about 4,375 contracts, the February 60 with volume of nearly 1,000 and the March 55 call with volume of roughly 1,100 contracts.
But nearly every call in the entire series traded.
The heaviest put action was in the February 50, where more than 3,550 contracts changed hands.
Traders said volatilities on the 3Com options continued to rise as the stock extended its decline.
Michael Schwartz, managing director at Oppenheimer, said volatility Friday was around 56, compared to a six-month average of about 49. |
