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OT - GFP. Writing uncovered options is referred to as a "naked" position. If those options got exercised, you would automatically create a short position.
If you have a margin account and approval, you can initiate naked positions. If you are only approved for writing covered calls, then you would have to buy back the calls you sold before being allowed to liquidate your long stock position.
Another way to write covered calls is by being long a call that is deeper in the money or has a longer strike. For instance:
You own DNDN June 15 calls. You can write April, May or June 20 or 25 calls against your long position. This is called an "option spread"
MF4
GFP - good idea to unload with a nice gain. It's impossible to call a top or bottom, but when it popped to 25, it just screamed parabolic to me. Not to say it won't head back up there, but considering your expectation for the stock, I would have done the following:
Sell as many April 25 calls as you can cover with your long position for $2+ (they traded as high as $2.80). If you're not familiar with options, that's an insane premium to pay for an option with 8 trading days left and being at the top of a parabolic move. Free money for the writer.
Anyway, in a week, DNDN will probably be in the low $20's after a pullback, but those options will be losing premium value very quickly. They will likely expire worthless.
At this point, you have a few choices: Stay long and await the FDA in May. Or, use some of the money you just made to go long on the May 25 calls. Ideally, you can buy twice the number of calls as your long position (using your April option profit). Then, hopefully the stock will rise above 25 before the FDA.
If this scenario unfolds as planned (it never does when I have actual money riding - for me) You sell your long position and half of your calls for another nice profit. This leaves you long some 25 call options, which you can exercise to get back into the stock should the FDA be favorable and the stock pops above $30, or you're protected should the stock fall because you've already made your profit on the stock move from 15.
I dream up these scenarios with options all of the time, but something usually goes wrong, like an extended time-frame due to delays submitting data.
MF4
GFP, still long DNDN? You could have sold April 25 calls for $2.80/share today. That would have been prudent, the only risk being you could be forced to sell your shares in the next 2 weeks for a net of $27.80.
Surely, you would have been able to buy back later for less.
MF4
GFP, I am duly impressed with your timing. You bought DNDN at 15 last week. Were I you I would sell them all at 22.5 today or higher if you managed. I would expect it to pull back to $20 on Tuesday, then settle around $21 before drifting slightly lower.
Actually, this would be a great time to sell 22.5 covered calls for April.
Just my take. But, I haven't followed this story at all.
Good luck,
MF4
OT: GFP WOW did you do well with DNDN! Nice timing. I guess your jinx is gone afterall? Also nice to se MEMY up 35% today. I'm finally above water with that one.
Is biotech (minus the usual suspect) rocking today for some reason?
MF4
GFP,
I like the timing. So, with any luck (for the rest of us), you'll still be out of COR when the good news hits ahead of your timetable in May.
Let us avoid the GFP jinx. Hahaha. Good luck on your plays,
MF4
My guess: Cancun
A word about August options.
I spoke to my broker today and they informed me that new options aren't issued for stocks trading under $3. He said that when COR goes and stays above $3, new options for August and later should automatically come to market after a few days.
So, depending on how things play out, August options may be available in May. But, will they be available before the FDA nods approval? probably not.
MF4
nascjay,
The strategy you described could be accomplished if you bought August 2.5 Calls today (if they were offered, which they are currently NOT offered, they might be priced at $60 per Call = 100 shares). Then, after the FDA decision in April-May, if the stock spiked to $5, one of your Calls would be worth at least $250. So you could sell it outright and pocket a 400% profit. Or you could write (sell) covered August $5 Calls to recoup your initial investment. You would also be able to make more profit on expiration in August, as your position would still pay you everything between $2.50 and $5.
Your buyer would get everything above $5
MF4
Fearfrost,
Your assumption on options is flawed: Options offer the chance for huge (relative) profit or smaller (relative) losses. It's a form of leverage.
Typically, on an options position, I will lose 100%, if I'm wrong, or make 100-900%, if I'm right. All in a few months or less.
MF4
My strategy was to go to Cancun for a week of R & R with my girlfriend. Man, did I need that!!!
I expected to come back and see COR around $3. Instead, it's just been sideways. MEMY lost me some on paper. Shouldn't have bought back in and second-guessed myself. Oh well! Cancun was awesome! Turns out fresh grouper in a garlic-butter sauce is the best fish I've ever had!
OT: No doubt about it when you're back in the States. The Police State is palpable here. People are flat. It's nice to see that some parts of the world are still vibrant. People there are smiling and freindly!
As far as COR, I'm in 100% until after FDA decision.
MF4
Jerry,
It only ties you up if you can't write naked options. I like owning certain options too. I'm just saying that options can be used in many ways to achieve various scenarios.
If you want to hold stock long-term, selling out of the money calls for a few extra bucks helps pay for the money you've got tied up in your long term holding.
MF4
Ombow,
No expertise. But, when COR met with the FDA officials a year ago, they discussed what tests should be done and the results that were needed. COR followed the directive. Stoll telegraphed to us all that those results and better were indeed acheived. The FDA will thank them, shake their hands, and release all restrictions.
Let those with ears hear and let those with eyes see. If you wait until it's official, you will pay double.
MF4
Jerry,
There are many ways to play the options. If you read what I wrote, you'll note that I didn't recommend selling 2.5 covered calls on COR because it limits your upside. But, if you want to play the FDA move (assuming August series opens) one could sell 7.5 or 10 calls right after a nice move above $6 for instance. This is a good strategy for someone that anticipates holding COR longterm and not selling at $6. He may have to sell at 7.5 or 10, but the odds of buying it back cheaper are more favorable in that case.
As far as the May 2.5 calls go. I bought some at .05, .10 and .15 On the recent spike I unloaded 10 at .45 Bought at .05 sold at .45 - 900% return in a week. Not bad. I still think the May 2.5s will be worth over $2 on expiration, but I was playing the price spike. I will buy more if they get that cheap again.
MF4
Ruengies,
I think diversification (stocks, CDs, Real Estate, Gold, 401K) helps one sleep at night. So, are we talking percentages of investable monies? or percentage of stock market monies? or percentage of speculative stock market monies?
I have done poorly in the stock market. But, I've done really well in raw land. Years ago, I bought some land when real estate was very depressed for very low prices. I didn't do it to get rich, I did it because I figured that land always has value (You can live on it, if you lose your house). Due to a variety of circumstances, the raw land I bought, suddenly became a hot area. In a matter of a few years, I had offers for 3,000% more than what I paid for the land. I got lucky.
This experience has taught me that to truly become wealthy, one has to recognize something that's undervalued, have the funds to invest, then pull the trigger knowing that the investment may never go up in dollar terms, but there is a decent chance that someday it will.
In light of this diversification, I am willing to spend a substantial portion of my total investable funds on a risky investment that I consider to be very under-valued. COR is just that vehicle at this moment in time, IMHO. The recent price weakness encouraged me to fatten my position by about 70% (including May 2.5 calls). When the stock was at $5+, I dreamed of getting more shares. It was painful, but I did get that opportunity, and I pulled the trigger.
Now, we await a binary event (FDA) that will be a huge inflection point. I'm all-in on this. I can live with this risk due to diversification. For me, 5-10% of my net worth is invested in a single play (COR). That's probably the most I would put into a single area.
But, If I were younger, and making a good living and trying to increase my net worth, I might go 30-40% in COR today. You have to get lucky somewhere, and there is a lot of supporting evidence for COR right now.
MF4
fearfrost,
I got so excited when I heard Cortex was going to start trading options, I bought another 20% (over $5). I'm an advocate of selling covered calls out of the money. And I thought that now, I can finally do it in a volume that will make a nice monthly income.
A month later, FDA hold comes and the stock plummets. Since then, No new options have appeared on the market. I'm wondering if the options market maker has decided to stop trading COR options? How would someone find this out?
My point is that I'm not sure you will have the opportunity to trade August options. But if we did, I would agree that selling covered calls would be a good way to hedge your position. At this price though, I'm not selling any calls, rather I have bought some of the May 2.5 calls
When/if the stock is above $5, I would be looking to sell some 7.5 calls and maybe a few $5s. How about this strategy: Sell some naked 2.5 puts (for August) now at .80 Wait for the pop to $6, then buy some $5 puts (at .40) to cover your 2.5's Then you even make money if the stock drops below $5 The downside of this would be buying COR at $2.5, if the stock plummets (but I would consider this to be low risk).
Of course, this all requires the market maker to open the August series.
MF4
DavidAl,
Aaah, Pamela Sue Anderson. Now, that's a hottie. You probably like Kiera Knightly too, huh?
MF4
GFP,
Ever see the movie "The Cooler"? You are him in real life. Forgive me board, but I had no idea this is who GFP is. Now I'm regretting encouraging you to buy COR. How much do I have to pay you to sell all your COR and not buy for at least a year?
MF4
GFP,
I had that power over Intel stock. Finally, I just stopped trading it. It hasn't budged in 7 years. Used to be a wild ride though.
MF4
GFP,
Buy options then. You can buy $2.50 calls May expiration for .45/share right now.
Scenario 1: COR goes to Zero, you've lost $4,500 on 10K shares.
Scenario 2: Cor opens above $5 after FDA. You've made $20.5K on the options (400% return, baby!) Or you can exercise the options and buy 10K shares for $2.50. Including the premium, you're buying stock worth $5 for roughly $3.
The only problem with the option approach is that the May calls expire on the close of May 18. If they ever offer a longer month, say August - I would buy those instead of May's. But May 18 is more than 60 days away, so, if you allow the FDA to take a full 60 and the packet is submitted by this Friday, It could work.
MF4
GFP,
You were only supposed to buy a few hundred! Oh the humanity! Is it too late to sell? LOL
MF4
Neuro,
Just to clarify further as GFP's "glass is half-empty mindset" always seems to latch onto every possible red flag < I'm glad somebody's hyper-vigilant, but how do you relax man?
As I understand your previous comments, Servier only has access to compounds that were co-developed with Cortex? Since they haven't actively developed anything lately, the only compounds they have access to are of the same potency/effectiveness as CX-516?
To clarify: Does Servier have any rights to CX717, CX701 or CX1501 at this point?
Thank you,
MF4
Neuro,
Thank you for the clarification. When I read that Servier still had it's hooks in COR, I skipped a beat. I'm glad that they really have no more ability to screw up COR. Getting Organon out of the picture is also hugely positive. These collaborations were not productive and inked by the previous CEO.
Things certainly have turned brighter for COR in the last few weeks, haven't they?
MF4
GFP,
I suggest you stick with your plan. However, planning on a 70% collapse at $3.60 might not materialize for you. I think this thing is due for a little irrational exuberance. I see it slowly inching up towards $4 in the next month. Then it pops above $7 after the surprise FDA restrictions are lifted in mid-April catching short sellers off-guard.
Then, you might get a 30% pullback chance to buy in at $4.70 before powering ahead to $8.80 at which point it will gap up over $11 as a deal is announced pre-Monday morning sometime in May.
But, I'm probably just smoking crack,
MF4
GFP,
I don't see a reason for today's spike in your price movement scenarios. What do you think is behind this move today? Is it follow-thru from last weeks strong finish? Is it JerryDylan's reverse head and shoulders? Is it speculation that Schering-plough will make a bid for COR in a few months?
I sure am glad I bought some around $2 - feels better than $2.40 But, I suppose $2.40 would feel better than $4. At $2.50, it would be the same price it fell to April 3rd, 2006 just after the FDA announced the hold and we had no idea what was wrong with CX-717.
Eleven months later that question has been answered, CX-717 is still extremely safe, minus any ambiguity, and it would seem the FDA will remove all dosing restrictions shortly. CX-717 appears to be the ideal medication for ADHD, not to mention the other orphan indications. It's hard to imagine that a BP will ignore COR for much longer. There might be pending deals already in the works contingent upon an FDA blessing? COR was trading at $5.25 on March 31, 2006.
Sometimes CD's pale in comparison. I'm sorry you couldn't find a few bucks to get in cheaper, as closely as you've followed COR over the years.
MF4
GFP,
I hear ya. I had a lot of financial growing pains when I first started playing this game. I stopped for a while, but I'm a gambler at my core. Ultimately, I had to make peace with myself. Now I play $6 poker tournaments on-line and that takes care of most of what I need.
With Cortex, I'm just a stubborn SOB. I know it will pay off eventually. Now I'm just holding to prove I'm right! Hahaha.
MF4
GFP,
As much as you have followed Cortex over the years (having notebooks filled with data), it seems such a shame for you to not participate in what looks to be Cortex's long-overdue final lift-off. I have a brokerage trade where I bought COR for .35 in 1995. So, you know I've waited a long time.
I would suggest to you that you can easily afford 100 shares. Maybe a few more? Some number that wouldn't bother you to lose (just in case) and just buy some. You know you will be kicking yourself if COR is sitting above $8/share this summer and you could have gotten in around $2. It's still cheaper than the day 13 months ago when the FDA hold was first announced and it hovered around $2.50 for a while. Back then, there was much more uncertainty, IMHO. You avoided that catastrophe and can now get in cheaper with far less risk, again IMHO.
Good luck whatever you decide,
MF4
GFP,
I think the FDA will review and release much sooner than 60 days. They told COR what they wanted. COR is able to provide that info and more. FDA has held up COR for 13 months now. They will take less than 60 days, IMHO.
What do you think of the price action Jerry Dylan? Nice volume. Buying interest into the weekend, and hit $2. I'm guessing that next week it goes up nicely.
MF4
Jerry,
Well, on the strength of your TA, I bought back my sold position in MEMY. I paid .05 more per share, but figured it was worth it. Well, not an hour later, it plunged and closed at $2.07 So, in a matter of an hour, I lost .16/share plus commissions. Fortunately, we're only talking about 400 shares, but still. My timing is just horrific!
Oh well, it's only money and you don't live forever. So, I'm going to reward myself with some prime rib at the Outback! That's my new philosophy: Anytime I do something bone-headed (quite often) I will do something good to myself!
MF4
Thanks Jerry
OT: Any thoughts on MEMY?
I got in at $1.20 Sold 10% at $4+ and dumped another 70% at $2.18 Does it have any bounceback potential? Is it another "wait a year for progress" story? Or is it cheap here?
Anybody follow this stock?
Thanks,
MF4
It's good to see Rogers will still be a consultant. This company seems to be stocking the shelves with experienced, connected people. Feels like they are about to jump up to the next tier or two towards becoming a working business entity.
Thanks GFP, OT
Unfortunately (or fortunately), I don't have any debt. I have been thinking that I would like to purchase a vacation residence (ski condo or lakefront home) and rent it out to pay the mortgage. But, the rental agency fees and cost for the property are so high, that it would be an underwater situation until the next round of housing inflation. And, having held an unappreciating house in the 90's for seven years, I have become averse to taking on large debts I couldn't pay cash for, if needed.
My situation has improved since then, so I would consider the vacation residence now, but just as housing prices have gone up dramatically in the last few years, vacation residences have gone up three-fold. It just seems like the wrong time to buy now. But, it would be a good inflation hedge.
Does anybody know of any undervalued, under-appreciated ski and/or water sport meccas where somebody can still find a decent deal? Could be overseas.......
Thanks,
MF4
GFP, I agree with your view. Any suggestions on how to play/survive it?
Thanks,
MF4
I would consider writing a book about COR investors. GFP would clearly be an interesting chapter. If COR does become the rags to riches story many of us dream it may be, every one of us CORheads will have a very interesting story to tell. What makes someone hold on and keep believing after 13 years and inumerable setbacks only to be correct in the long run and wealthy like a king?
Quotes of webposts with personally relevant life events laid out in chronological sequence that reflects on each of our own backgrounds and investment choices regarding COR and the various developments as they unfold(ed).
That would indeed be an interesting book!
MF4
If you buy at $2, you can get twice as many shares as at $4. Bio stocks are a gamble. You can't buy in the money call options with no expiration date on anything for these prices. Treat COR like it's a call option, and it's still a steal.
MF4
The only thing that makes any sense is if COR can get an in-license candidate as part of an intricate deal with a BP, where COR doesn't pay a penny in cash and still keeps Ampakines for orphan indications.
Anything else would be a mis-step by Stoll, IMHO.
MF4
GFP,
If you got out of COR in the $5s, and can buy back in in the $2s, you will still have done very well.
I often thought when the price languished in the low $1s that someone could accumulate millions of shares and make the supply scarce when good news comes out. Perhaps someone was doing just that?
Just as last year, COR could do no right, things may be setting up for a "perfect storm" of positive news this year. I think the FDA will be swifter in their response than the end of June, as you suggest. They have derailed CX-717 long enough. I will be on vacation in Mexico the week of March 18th, so that might be a big news/activity week?
Also, as soon as the limitation is lifted, I would expect some deals to be inked. A good one for both sides. Unplanned positive news from Organon also. Scarcity of shares. This could hit double digits concievably in 2007. Now, I'm not calling it a slam dunk, but some positive surprises might very well surface.
I really hope you can liquidate some funds and participate in the long overdue price appreciation that is due Cortex shareholders.
Also, notice that all of the insider activity has been purchases by option exercise and/or open market buys. This has to be another positive.
MF4
Fearfrost,
Sell some sovered calls to recoup part of your costs. You need to be calm and confident here. Let it ride. Don't let the gyrations of the market freak you out. Don't use margin money. Get to a place where you are comfortable with what you hold.
I too am way overloaded in COR. However, the risk here is missing out on the upside, not downside. When it gets above $4, I see it as risky until the FDA confirms the move, then it pops above $5. For good? Just my opinion.
MF4
No doubt they met with the FDA months ago to try to understand what would clear the hold. Obviously, Stoll has that and then some, so he is confident the FDA will keep their word. No other interpretation is needed.
Should I buy more here? It's still under $2 (very cheap).
MF4