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Biotech / Medical : IDPH--Positive preliminary results for pivotal trial of ID
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To: I. Luttichuys who wrote (709)4/18/1997 8:43:00 PM
From: jay a   of 1762
 
this is the reader's digest version. the purchase of the calls @ 1/2 cost $12,500 (ex. commis.). the sale of the puts @ 3 1/2 results in a credit of $87,500. sounds great, right! the catch is IF the stock drops the trader could be required to purchase 25,000 share @ 20 per sh. you do the math---that's a lot of cabbage my most standards. it's true that if the stock drops he can exercise the calls to deliver the stock to the exerciser, but, that would be a very costly move. it is true that he could "unwind" his position before expiration. however, a trade like this is not done without a lot of confidence. confidence wil not make a stock go up or down, but i would not bet against this guy. i watched the option volume (academic studies show option volume proceeds stock movement) very closely the last few days. definetly biased to the up-side. many sense opportunity. if the volume was just rookies and small size orders i would not be impressed. but like i stated before, this was not a rookie!
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