Momenta Pharmaceuticals Inc. Message Board

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Biotech / Medical : Momenta Pharmaceuticals Inc.

MNTA 52.48

0.0%

Oct 2 5:00 PM EST

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To: Jeffry K. Smith who wrote (2564)	10/26/2010 11:48:30 PM
From: IRWIN JAMES FRANKEL	Read Replies (1) of 3027

So far I have never seen a stock go up an unlimited amount. So as a practical matter the strategies are similar. Not sure how to explain this - I would never make a teacher. But selling a call with a higher strike than the price you buy the stock is very similar to writing a put below the price you shorted the stock. In each case as the stock moves toward the strike you are making money. In each case as the stock passes the strike, you start to lose money or opportunity cost. So long as the movement is not sudden you can hedge the risk. Even if the movement is sudden, there will be a big jump in IV which will allow you to mitigate the loss, by writing out in time and away from the point of initiating the position. The worst example of a sudden move that got me was long ago. US Steel offered to buy Marathon Oil while I was naked short calls. But I was able to roll the calls up and out in time. Think I did that twice. Because of the huge jump in IV, I was able to come out of the transaction with a small and very manageable loss. ij

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