21-08-07

Dendreon position closed with a profit of 36%.

The order to sell 20 puts September 2007 with a strike of USD 2.50 on goldmine CRYSTALLEX (KRY - USD 2.95) was filled at our price of USD 0.30. By selling those puts, we entered the obligation to buy 2.000 stocks at USD 2,50 if case KRY would trade below that price towards mid September. Our savings account is credited with USD 600 (20*100*0.30). The amount of USD 5.000 is put aside as a guarantee (100% margin rule) in order to meet our financial obligation in case we would be assigned. As the maturity of the option is only 1 month away, we can make 12% on our committed capital in 1 month time ( 600/5.000), or a fenomenal 140% on annual calculations.. KRY is allowed to fall 18% further (from 2.95 to 2,50) before we start earning less. Only at prices below USD 2.20 (2.50 minus the received premium of 0.30) the profit is gone. This means that KRY can drop another 25% from the current level before we would end up with a loss.

Last Friday our covered calls on biotech firm DENDREON (DNDN - USD 7.61) matured worthless. Back in May we got executed on our short USD 7.50 put position in the stock. As a result we had the buy 1.000 stocks at a price of USD 7.50. We received USD 1.10 per share for those puts. Once assigned, we sold august USD 7.50 calls for a premium of USD 0.90. By doing so we agreed to sell DNDN at USD 7.50 if the stock would trade higher, which it didn’t. Taking into account both received premiums (matured puts at 1.10 and matured call at 0.90), our break-even buy level of DNDN is actually USD 5.50 (USD 7.50 - USD 1.10 - USD 0.90). In this Option Portfolio we don’t like to keep assigned stock too long. As soon as they reach the buy level again and are uncommitted by options, we will unload the stocks. As the calls on DNDN matured last Friday, the stocks are now available to be sold. We give an order to sell 1.000 DNDN at USD 7.55. If done, we make USD 2.050 (1.000*(7.55-5.50) on the position (option premiums included).  That is 36% in 3 months. Not bad at all. We will consider selling puts on DNDN again once the order is filled.

20:48 Gepost door in Orders | Permalink | Commentaren (1) | Tags: dndn, kry |  Facebook |

Commentaren

Hello, could you propose a strategy to follow on SUN ( Nasdaq SUNW ). Thank you

Gepost door: JB | 21-08-07

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