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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
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To: Herm who wrote (7356)4/28/1998 3:05:00 PM
From: FruJu  Read Replies (1) of 14162
 
Hi Herm

It looks like VVUS is drifting back down again.

I'm in VVUS as well; bought 500 earlier in the year at 12 1/2, and broke my cardinal rule of buy-writing. Watched in horror as it drifted down to 7 1/2 last week, without any CC protection. Luckily, we got the analyst upgrade, and it shot up to 13 1/2, at which point I sold May 12.5 Calls at 1 3/4.

Now, I see the May 12.5 calls are trading as low as 1/2 again (as VVUS drops to under 12).

What would be your plan of action here?

My first thought is to cover, and roll down to May 10 CALLs, but I guess this depends on your philosophy of where the stock is going.

Here's my rationale. Given the recent history on this (and seeing as the news between now and May is likely to be more of the same - i.e. Viagra selling in record numbers, MUSE scripts down), I'm betting on a gradual decline below 10 again.

The certification in the UK of the new plant provided only a temporary blip (1 point or so) when it happened last month, so I don't foresee FDA certification having a big impact.

I think this stock will only turn around if the supposed "coattail" effect comes to light, and I doubt that will happen for another 3 months or so.

Your thoughts?

E>
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