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Biotech / Medical : Zonagen (zona) - good buy?
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To: Peter Goss who wrote (1761)1/15/1998 10:02:00 PM
From: Slim Pickens  Read Replies (2) of 7041
 
100 Feb 15 puts...I'm not sure that's bearish. It could be protection for a long position. Maybe someone is positioning for a short squeeze. Say you bought 10,000 shares ~15 and hope to see 20 before Feb 20th. Then as protection, you pay $1.43 to protect the down side. Then what if:

A. Stock goes to $10...your puts are worth ~$6 and your stock worth $10 for a net of minus $0.43.

B. Stock stays at ~$17...your puts are worth $0.0 and your stock worth $17 for a net of +$0.57

C. Stock goes to $20...you puts are worth $0.0 and your stock worth $20 for a net of $3.57.

Maximum loss, $0.43 vs. possible gain of $3.57 or maybe more if there is a short squeeze.

If this was a bearish move, one might sell the stock short and protect the upside with calls, don't you think, or not?
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