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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!

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To: KELLIS who wrote (1862)	4/24/1997 10:45:00 PM
From: Maureen	of 14162

RE: Ceph Kellis, I noticed Ceph the other day.. The calls are selling for a huge premium... currently sitting at over 13% return called or not... (w/o margin) 206.7.107.6 I checked the chart and news quote.yahoo.com and noticed especially this news.... I had never seen something like this before biz.yahoo.com Wednesday April 9 8:32 AM EDT Cephalon Announces Plan to Purchase Call Options WEST CHESTER, Pa., April 9 /PRNewswire/ -- Cephalon Inc announced today that it has entered into an arrangement with a financial institution under which Cephalon intends to purchase call options representing the right to acquire up to 2.5 million shares of its own common stock. The purpose of acquiring call options is to allow Cephalon to benefit, subject to the terms of the call options, from any appreciation in the market value of its common stock by receiving in cash any excess of the fair market value of the stock over the strike price of the call options. Any call options to be purchased by the company would be acquired from the institution in one or more transactions, with the number of options and their purchase price, strike price, appreciation cap and other specific terms of the call options to be agreed upon at the time of each purchase. The options are expected to have a term of six months. The purchase price for the call options would be paid by issuance of up to 500,000 new shares of the company's common stock, subject to the effectiveness of a registration statement which Cephalon has filed with the Securities and Exchange Commission. The institution selling call options may engage in transactions, including market purchases and sales of Cephalon's common stock, to offset its risk related to the options... Does this type of thing happen often? That a company actually buys a lot of it's own options? I would think this is a very good sign... Basically it looks like the company is pretty certain that they will get the go ahead from the FDA on their new drug Myotrophin which is scheduled for a May 8th FDA Advisory Panel Meeting... Although they apparently are going to give it atleast 6 mos. to pay off. I then went to check the SI thread on CEPH... (where I see you have also stopped by Kellis!) Subject 5341 There is a bit of discussion going on here between ones who are short the stock and the ones who believe in it... I don't know... I really don't like the biotechs... they are so dependent on these FDA approvals... I just have never been able to call them correctly. But this one, really is interesting with that news about all the options they are buying. Do companies routinely do this? I have never seen this reported in this way before. It seems like the ultimate "insider buying" - especially given the time limitations on these options.... atleast if they were buying back shares they know they have a long time for them to pay off... with the options it's either sink or swim. Any other opinions on this? Anyone aware of companies doing this sort of thing to this extent often or no??? Good luck if you go for it! Maureen

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