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Hi Jim,
VVUS History:
I don't want to confuse what is going on with VVUS. So, let me address your question. It is my personal trading style and not the only way to play it. But, back when VVUS was trying to break through the $30-$31 price resistance alot of CC money could have been generated by selling At The Money CCs a few months out, covering on the pull-back (1st round - RSI dropped), selling At The Money CCs again one month out when the price increased (second dip), covering CCs again on the pull back (RSI dropped again), and selling CCs again after a price increase. Now, the strike price and the months out you select could change vary depending on the volume swings and lenght of time between pull-backs and price increases. I did my first triple play with VVUS and then missed the timing this last time around. I had the DEC 32 1/2s and you had the $30s if I recall.
Now Jim, this past Friday is when VVUS dropped 2 points and should have been your CC covering (exit) for your VVUS $30s CCs because you would be able to now wait for the appropriate time to pick up a higher premie and roll up maybe two strike prices on your next round of VVUS CCs. I'm sitting right now with no CCs out there. I'm going for the KAHUNA next week with my 10 OCT 35s CALLS as my sideshow and my next write for 10 NOV. CCs on a strike price to be determined next week as we get closer to the earnings date. It will most likely be the $40s or $45s for some serious money!
Will VVUS come back after the pull back? Sure, but they will need a boost like the UK deal, the completion of the new plant and perhaps another few countries in Asia to boost future earnings. That will propel VVUS upwards again! They sure will have the money on hand with the higher stock price.
Makes sense?
VVUS FUTURE PLAY:
The VVUS earnings report will be fantastic and the price of the stock will move past $40 to perhaps $43 BEFORE VVUS PULLS BACK! Why? Because VVUS will have reached it's 52-week high and then some. Those who picked up VVUS this past January 1997 (on high volume setting the old 52-week high) will have a small profit for their nerve racking drop to $22 at it's low. They will jump ship! Further, those who caught the VVUS climb from $22-$24 range to $40+ will be greedy and will exit out the door faster than Carl Lewis' 1/4 mile olympic sprint record.
So, we have several choices to think about and prepare for! Do we cash in and run? Or, do we milk VVUS for another round? Meaning, we buy protective PUTS that will be cashed in when VVUS pulls back after the $40 mark. VVUS WILL PULL BACK or my name is not Herm. Also, writing At The Money CCs two months out at the VVUS peak that will rack in HUGH premies that will erode on the VVUS pull back and we will later cover to start the whole process over again!
Do you see the process of how I'm planning my "sowing and reaping" techniques? What you "sow you will reap!" :-) Amen
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