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: IRWIN JAMES FRANKEL who wrote (2566)	10/27/2010 9:30:49 AM
From: Jeffry K. Smith	Read Replies (1) of 3027

"...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..." You're completely understandable, and I agree with the above - but you've talked about the stock moving with you, not against you. If a shorted stock moves the other way, THEN you've got the unlimited risk that has no equal in a covered call situation. It's that part of the equation that made me make the statement that (essentially) the two strategies have very dissimilar risks. Congrats for covering your naked calls. To me, naked calls (or shorted stock) have risk profiles akin to walking into a biker bar and yelling "Harleys blow!!"

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