Qwest (Q) Exec Nacchio Found Guilty – A Look at Qwest’s Future.

Joe Nacchio, a former AT&T (T) executive, was hired by Qwest Communications in 1996 to evolve the company into a major telecommunications competitor. However his monomaniacal pursuit, a Colorado jury found yesterday, led Nacchio to participate in illegal insider trades. He also, in the company’s relentless drive to meet revenue projections, did not appropriately inform investors of the financial risks the company was taking.

Audio Podcast:
An audio podcast of this article is available at: poweropt.com/podcasts/2007_04_19_Qwest.mp3

After the jury deliberated six days, they concluded Nacchio illegally sold stock when he knew the company faced financial challenges, which would lower stock price. The former executive is currently free on $2 million bail, but faces a potential penalty of 10 years in prison and a $1 million in fines.

This PowerOptions blog entry is an example of how the average investor can identify the most attractive option trade based on their view of whether a stock will rise or fall. If an investor’s view is bullish, they might choose to use a covered call investment strategy, bull call debit spreads or bull-put credit spreads to make money off their hunch. If an investor believes a stock will fall, they might choose bear put debit spreads or bear-call credit spreads.

This article will focus on the bear put debit spread. We are making the assumption in this article Qwest’s and other telecommunication stocks will fall. This may not be the case. This serves as an example of how you can identify the most appealing option trades using PowerOptions search technology.

Troy Eid, the U.S. attorney for Colorado, was quoted as saying, the phrase “‘Convicted felon Joe Nacchio’ has a very nice ring to it.” However Nacchio’s attorney, Herbert Stern, felt Nacchio deserved impunity as he maintained a stoic adherence to the notion a grave injustice had been done, “We certainly will appeal,” he said.

Nacchio seemed to maintain his optimism as he was reported to have sallied from the federal courthouse arm-in-arm with his wife, disappearing together into the busy downtown Denver streets.

Prosecuting attorney Cliff Stricklin said the jury “saw at some point that Joe Nacchio knew what investors didn’t and chose to profit from it. Insider trading is not a victimless crime. It’s a crime about fairness. Many lost their hopes and dreams while others at Qwest took the easy way out.”

Opinions of Qwest and Sprint:
The Motley fool website has sited Sprint (S) and Qwest as stocks to avoid primarily because of debilitating debt. The stated on their website, “Both businesses have piles of debt because they needed to take on that debt to build out their networks enough to compete. Now, they have to both pay down that debt and evolve to compete with new technologies that are invading their traditional niches.”

Potential Trades:
The following bear put debit spread trades have 29 days until expiration. These trades were discovered using the powerful suite of option search tools found at PowerOptions.

Q – Qwest Communication. This trade involves the May $7.50 and May $12.50 put options and offers 44.9% potential profit if the stock is below the $7.50 strike price at the end of the option period. Qwest is currently trading at $9.07.

S – Sprint Communication. This trade involves the May $19.00 and May $22.50 put options and offers 66.70% potential profit if the stock is below the $19.00 strike price at the end of the option period. Sprint is currently trading at $20.28.

S – Sprint Communication. This trade involves the May $20.00 and May $22.50 put options and offers 35.10% potential profit if the stock is below the $20.00 strike price at the end of the option period. Sprint is currently trading at $20.28.

Competitors:
Competitors for Q include: AT&T Inc. (T), Sprint Nextel Corp. (S), Verizon Communications Inc. (VZ), Cbeyond Inc. (CBEY), Citizens Utilities Co. (CZN), and Iowa Telecom. Svs. Inc. (IWA).
Competitors for S include: AT&T Mobility LLC (private), Cellco Partnership (private), T-Mobile USA, Inc. (private), ALLTEL Corp. (AT), Broadwing Corp. (BWNG), Cincinnati Bell Inc. (CBB), US LEC Corp. (CLEC), Dobson Comms. Corp. (DCEL), Leap Wireless Intl. Inc. (LEAP), Philippine Long Dist. Tele. Co. (PHI), Qwest Comm. Intl. (Q), AT&T Corp. (T), United States Cellular Corp. (USM), and Verizon Wireless (VZ).
For more information about how to identify and research great option trades, visit the PowerOptions website. There you will find the data you need to make quick, clear, and informed decisions. You can trade knowing you have found the best investment. Also, PowerOptions will allow you, with a few quick clicks, to quickly and accurately compare trades. PowerOptions‘ premium customer support is second to none in the industry. They can be easily contacted when you need them at their toll-free number to answer customer questions. Call them now toll free at 877-992-7971.

PowerOptions provides a free 14-day trial of its service. So join PowerOptions today, and you too can start reaping the benefits of the covered call investment strategy.

PowerOptions‘ sister company PowerOptionsApplied provides expert stock option trading recommendations. PowerOptionsApplied specializes in covered calls, naked puts and iron condor stock options strategy recommendations. PowerOptionsApplied provides a 30-day risk free trial of its service.

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