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Post by milachka63 on Jan 4, 2014 19:42:02 GMT -5
Thank you. I stand corrected. My bad. Ashiwi, I think babaoriley was hinting that you should consider moving out of shares and going long a call spread (e.g. Aug 10/5). That will only cost about USD 1.00 which will also be your total risk, but you will keep most of the profit potential. So it might still be a life changing event for the good if Afrezza gets approved, but should the decision be bad, you won't be affected too much.
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Post by babaoriley on Jan 6, 2014 2:18:09 GMT -5
Hi, milachka, not sure I follow. Do you propose buying the August $5's and selling the August 10's to help finance the purchase of the $5's? That's an okay strategy, however, if the stock gets past $10 by August, where does that leave you? You make a nice profit for your $1.00 to $1.20 or so net investment, as you'll get close to $5 when you close the spread (assuming the stock is over $10), so that's a bit over a triple, which is great, but that won't help you swing for the fences like many here like to do. Pretty much all appreciation over $10 is lost by that method, if I'm understanding you correctly.
But as an ancillary strategy, for someone who already has pretty much all the stock they want to have (and want to keep what they have), it's not a bad strategy at all. But that's not what I meant by my comment, I was talking about selling warrant or stock covered calls for a strike of $10. Your way, one risks more money, my way, you lower your downside if things don't work out. But I do like the return for the risk of your strategy if one is still in the "I want to make more when this thing hits, but I don't want to risk losing $4 per share on a $5 investment if it crashes, but would be willing to lose a buck to make three if it hits" mode.
I'm currently happy with my upside, so I'm more into the simpler "I want to mitigate my losses if this one crashes" mode.
If anyone doesn't understand the above and actually cares to, just say the word. There's certainly a lot of ways to play options (and I certainly do not know them all as this response attests), and with MNKD, they offer them weekly over the nearest four or five week period these days, so one can wheel and deal!
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Post by ashiwi on Jan 6, 2014 5:52:12 GMT -5
Throughout this year I have sold "PUTS" . It's worked out very well as they have been expiring worthless every month. Once the phase 3 trial results were released and it became apparent that there was going To be a "sell on the news" scenario I wrote out of the money covered calls against all of my shares. I recently bought them back for pennies to be safe (keep my shares) should a partner emerge and we have a major pop. I still have some puts sold for jan and feb which I expect to expire worthless. To go along with my core shares I also own calls That I bought early last year that are deep on the money which expire next week that I will exercise. I also own more calls for Jan '15. The selling of puts and writing calls have lowered my avg cost and have provided some entertainment while we wait. Selling my shares is always the most difficult thing to do. A buy out would make that decision a lot easier, but I would gladly wait until MNKD reaches it's full potential. I wouldn't mind an "irrational exuberance" type of move on good news.
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Post by milachka63 on Jan 6, 2014 9:23:03 GMT -5
Hi, milachka, not sure I follow. Do you propose buying the August $5's and selling the August 10's to help finance the purchase of the $5's? That's an okay strategy, however, if the stock gets past $10 by August, where does that leave you? You make a nice profit for your $1.00 to $1.20 or so net investment, as you'll get close to $5 when you close the spread (assuming the stock is over $10), so that's a bit over a triple, which is great, but that won't help you swing for the fences like many here like to do. Pretty much all appreciation over $10 is lost by that method, if I'm understanding you correctly. Yes, that is what I was proposing and your assessment of the consequences is also correct: nor profit beyond MNKD at 10. I have 5/15 call spreads myself as I also harbour some hope that we may go over 10. I am not sure about the 'swinging for the fences' comment though. Assuming that the risk of a bad decision is USD 4 (drop from 5 to 1), I could buy 4 times as many spreads for the same amount of risk. So for 4 dollars of risk I might get 15 dollars of profit between now and August. For the same to happen with shares, MNKD would have to go to 20 by August. I don't think that is likely. So this strategy is also suited for swinging for the fences. Anyway, I proposed is as a risk mitigation strategy while still keeping significant upside. But as an ancillary strategy, for someone who already has pretty much all the stock they want to have (and want to keep what they have), it's not a bad strategy at all. But that's not what I meant by my comment, I was talking about selling warrant or stock covered calls for a strike of $10. Your way, one risks more money, my way, you lower your downside if things don't work out. But I do like the return for the risk of your strategy if one is still in the "I want to make more when this thing hits, but I don't want to risk losing $4 per share on a $5 investment if it crashes, but would be willing to lose a buck to make three if it hits" mode. Here I don't understand you (and I think you should reconsider). By holding stock and selling covered calls at 10 you hang on to most of the downside risk and limit your profit potential in the same way as you would with a long call spread. Basically, being long stock and short covered calls is the same as being short puts which is a good strategy until before the binary event of the decision. I don't think it is a good position to be in on the day of the decision.
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Post by babaoriley on Jan 6, 2014 9:58:44 GMT -5
Thanks, Milachka! Good points and analysis.
All looks good today, so far!
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Run up.
Jan 6, 2014 12:50:07 GMT -5
Post by nemzter on Jan 6, 2014 12:50:07 GMT -5
Will we past 6 today?
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Run up.
Jan 6, 2014 13:23:00 GMT -5
Post by liane on Jan 6, 2014 13:23:00 GMT -5
Could come close nemzter. We broke out of an ascending triangle, and I think that puts us to a target of $5.97 (correct me if I'm wrong BD).
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Run up.
Jan 6, 2014 13:46:54 GMT -5
Post by BD on Jan 6, 2014 13:46:54 GMT -5
The morning session was pretty choppy, but I'm seeing a nice pop from 5.62 to 5.74 right now into a converging triangle, so if I had to put out a WAG I'd say target price of 5.86 for today. Let's see what happens
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Post by Chris on Jan 6, 2014 17:43:02 GMT -5
Hey, Chris, I don't have many shares, I have a bunch of those Feb 2016 warrants. Yes, I plan to sell some before April 15, unless they aren't materially above where there are now. I would look forward to selling some around high 3's or better, of course (remember, they got to $4 very briefly concurrently with trial results announcements in August). Since the FDA may respond early, it will be a bit tricky, don't want to get caught with an early denial. Although I think I could live with an early approval, LOL! But, the first time I will be looking to sell a few warrants or shares will be after a pre-PDUFA partnership announcement, one of my selfish reasons for wanting that to happen soon. Additionally, if we get a partnership announcement, I might sell a few longer term calls right after that announcement. Perhaps Jan 2015 or even 2016, and I would look to go fairly high on the strike price, to allow for a good amount of appreciation. Right now, I have a bunch of naked puts with $4 and $5 strikes for February, as I don't think we're going to get hit hard between now and then. I also have sold some covered calls at a very modest $6 strike for February, so I'll lose the few shares I have if the stock goes above $6 by then, and that would be okay with me. The premiums are pretty generous on the options, and that's something you don't find much of these days in stocks, and, of course, that reflects the level of uncertainty, volatility and risk of this investment. You wanna see some nice premiums, check out Herbalife (HLF) for February, post earnings announcement, I believe, wow! I used to like Vegas and the ponies (a lot), no desire for that anymore, the market more than satisfies that urge. Beautiful! Covered Calls are great, aren't they? Do you typically sell calls with a 3, 6 or 1 year contract? The longer, the more premium in relation to the strike price and current price; but I don't like being tied too long and I've been leaning towards 1 to 3 month contracts. What's your usually strategy and measurement tool to gauge which covered call strategy to execute? Thanks Baba
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Run up.
Jan 6, 2014 17:44:50 GMT -5
Post by Chris on Jan 6, 2014 17:44:50 GMT -5
The morning session was pretty choppy, but I'm seeing a nice pop from 5.62 to 5.74 right now into a converging triangle, so if I had to put out a WAG I'd say target price of 5.86 for today. Let's see what happens BD do you use Japanese candle charts or what charts do you use? What do you think about today's volume and move? Seems like there is a battle. We're down after hours.
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Post by babaoriley on Jan 6, 2014 18:56:05 GMT -5
Chris writes: "Covered Calls are great, aren't they? Do you typically sell calls with a 3, 6 or 1 year contract? The longer, the more premium in relation to the strike price and current price; but I don't like being tied too long and I've been leaning towards 1 to 3 month contracts. What's your usually strategy and measurement tool to gauge which covered call strategy to execute?"
I'm all over the map, Chris. Kind of a feel thing for me. But one thing, especially on volatile stocks, where you find the best premiums, obviously, I watch out for earnings release dates (on stocks on which earnings matter, not developmental biotech, obviously, there are other dates you need to know for that). I'm willing to sell an expiry right after an earnings release date, but I give myself extra cushion, and still can get a decent premium.
I tend to favor one or two months out, but have plenty that are January 2015, and even a couple of Jan 2016. I also have them in most all the months in between, but fewer.
If you can only get a dime for a month, it doesn't make as much sense with the commission, so I'll go two months for .20 almost every time (if possible), especially on a single digit stock, as the return for amount set aside to secure the put is pretty darn good. I also try not to have too many puts expire in the same period, especially a short term put, just in case there is a dip in the market at the wrong time, as your shorter term options tend to be sold closer to the money.
With MNKD doing well lately, I might consider selling Feb 7's, haven't really looked yet, but sounds like something I may like. I'll still be pleased if it zooms right by $7 by Feb 21!
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Post by MnkdMainer (MM) on Jan 7, 2014 1:21:13 GMT -5
Ashiwi, I think babaoriley was hinting that you should consider moving out of shares and going long a call spread (e.g. Aug 10/5). That will only cost about USD 1.00 which will also be your total risk, but you will keep most of the profit potential. So it might still be a life changing event for the good if Afrezza gets approved, but should the decision be bad, you won't be affected too much. I'm still new to options, so I would appreciate an explanation of the "call spread" you are describing. I'm not clear on this term or concept. However, it sounds like a prudent investment strategy, which is something I need to balance my heavily weighted investment in MNKD. I have purchased calls in the past, and I recently sold a relatively small amount of covered calls (about 5% of my total shares). I have considered buying puts going into approval to protect myself, but I agree with others that the premium for those puts is very expensive. I would like a less expensive way to protect myself against what I believe is a very low risk of non-approval, and I definitely want to participate in as much of the upside following (expected) approval as possible.
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Post by MnkdMainer (MM) on Jan 7, 2014 1:40:58 GMT -5
Hi, milachka, not sure I follow. Do you propose buying the August $5's and selling the August 10's to help finance the purchase of the $5's? That's an okay strategy, however, if the stock gets past $10 by August, where does that leave you? You make a nice profit for your $1.00 to $1.20 or so net investment, as you'll get close to $5 when you close the spread (assuming the stock is over $10), so that's a bit over a triple, which is great, but that won't help you swing for the fences like many here like to do. Pretty much all appreciation over $10 is lost by that method, if I'm understanding you correctly. *** If anyone doesn't understand the above and actually cares to, just say the word. There's certainly a lot of ways to play options (and I certainly do not know them all as this response attests), and with MNKD, they offer them weekly over the nearest four or five week period these days, so one can wheel and deal! Do you mean buying August $5 calls (at a current price of $2.32 per share) and selling August $10 calls (at a current price of $1.02) for a net investment of $1.30 per share? If the stock rose to $10 or above in August, that would yield $5 per share for the $1.30 per share invested, or a 385% gain, but you would not participate in any upside above $10 per share. Is this what you mean? Is there a way to participate in more of the upside if the stock substantially exceeds $10 per share by August? I ask because I don't see any August call options at a higher strike price (using Yahoo's option chain).
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Post by MnkdMainer (MM) on Jan 7, 2014 1:44:48 GMT -5
*** I was talking about selling warrant or stock covered calls for a strike of $10. Your way, one risks more money, my way, you lower your downside if things don't work out. *** Please explain. I do not understand why this is a superior strategy.
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Post by MnkdMainer (MM) on Jan 7, 2014 1:49:25 GMT -5
I do like the return for the risk of your strategy ... but I don't want to risk losing $4 per share on a $5 investment if it crashes, but would be willing to lose a buck to make three if it hits" mode. Isn't the latter what Milachka is proposing? See my previous post which offers a 385% return between now and August with a $1.30 per share investment. Milachka, am I understanding your proposal correctly?
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