Novellus Systems (NVLS)

January 08, 2009

Dear Fellow Options Traders,

Novellus Systems (NVLS) is a semi-conductor-capital equipment company. In this very highly-cyclical business, the best time to buy is when the news is the worst. Can the news from its No. 1 customer of equipment, Intel (INTC), get worse? Market participants through options are taking a bullish stand.

Over the past two days, the options have been very active and bullish.

Yesterday, 18,000 calls traded and 9,000 have already traded today, which is four-times the usual volume.

Yesterday, the focus of the activity was in the Feb 15 calls, which traded 7.665 contracts. Today, more than 8,000 March 12.50 calls (NLQCV) have traded on the offer at $1.95 -- with open interest at 2,152, the probability is high that some of thede trades are opening.

Novellus is scheduled to report earnings Jan. 26. With NVLS at $13.80, the company is trading at less than one-time price-to-book (0.92). It has $4.66 in cash per share.

We recommend playing this with a bullish bet and buying the NVLS Feb 15 Calls (NLQBC) for 75 cents or less.

The option may have a price slightly above that, but use your limit orders and be patient, as we've seen the ask price for the calls jump around a bit today.

Have a great day trading.

Nick Atkeson and Andrew Houghton
Editors
Options Trader


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