12:45pm (EST)

The market is mixed as we head towards the second half of trading.

The Dow is up 16 points to 12,396 while the S&P 500 is lower by a point to 1,327.  The Nasdaq is down 7 points to 2,773.

Tech has been weak as shares of Apple (AAPL, $330.67, down $4.39) and Google (GOOG, $576.03, down $2.13) weigh on the Nasdaq while the Financial stocks have helped the blue-chips.

In M&A news, Level 3 Communications (LVLT, $1.60, up $0.16) will acquire Global Crossing (GLBC, $23.29, up $8.49) in a stock-for-stock deal worth $3 billion.  The combined companies will form a unique global services platform operated by fiber optic networks on three continents which are connected by extensive undersea facilities.

Global Crossing shareholders will get 16 shares of Level 3 common stock for each share of Global Crossing common stock or preferred stock that they own.  Based on Level 3’s closing stock price from last Friday, the transaction is valued at $23 a share for each Global Crossing common or preferred share.

We have been following Global Crossing for nearly a decade and recently had the stock on our Watch List.  On March 4, here is the trade we were watching and our thoughts (quotes are from that day):  

Global Crossing (GLBC, $15.40, up $0.20)

September 20 calls (GLBC110917C00020000, $0.70, flat)

Thoughts:  The bid is 45 cents, the “ask” is 70 cents but these options are so thinly traded.  The stock doesn’t trade the volume we would like to see either but we think shares are headed to $20. (END)

Well, the Global Crossing September 20 calls (GLBC110917C00020000, $4.80, up $4.40) have surged today.  These options are still thinly traded but hit $7 this morning at the open.  We would have loved to have made this an official recommendation but the lack of volume kept us on the sidelines.

We have had the same problems getting good fill prices on options with Boston Beer Company (SAM, $91.01, down $0.49) whose shares we have been following since the $50’s and Diamond Foods (DMND, $60.01, down $1.60), a stock we have been covering since the low $40’s.

The point is, when you see strong companies growing their businesses and gaining market share, then sometimes it is okay to pay a little more for the options.  We were hoping for a little more volume in these options but it is a lesson learned.  Next time, we will go with our instincts.

The good news is we have a few trades today that are showing solid gains and we have quite a few ready to go if the market can break resistance.  We have also listed some put options on our Watch List to take advantage of a pullback but it is too early to tell which way this battle is going to shake out.

Subscribers, check the Members Area for the updates.

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