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Biotech / Medical : Biotech Valuation -- Ignore unavailable to you. Want to Upgrade?

To: Cary Salsberg who wrote (5139)	12/14/2001 1:17:19 PM
From: tuck	Read Replies (1) \| Respond to of 52153

This is ancient history, but an excellent thread called "How to Write Covered Calls: An Ongoing Real Case Study," covered VVUS for some time. Step into the Way Back Machine: Message 1600229 I have been doing this for some time. In general, though, my strategy has been to write ITM calls on core holdings that have had runups. Calling tops (and bottoms for buybacks) is difficult, and it's easy to get whipsawed. That's why you collect the big premium bucks on biotechs. Overall, I would say that this strategy has made me a little extra cash, and protected me from some catastrophes a little better than just being long the stock. Oh, and I always use spreads to roll options, to avoid execution risk (i.e. the stock moves down before you can get the order in to write a fresh batch after you bought back a batch close to expiration). Cheers, Tuck

To: Cary Salsberg who wrote (5139)	12/15/2001 11:40:47 PM
From: Biomaven	Respond to of 52153

Cary, <Covered calls on biotechs> The trouble with this strategy is that individual biotechs always have the real possibility of crash and burn. The reason to hold biotechs at all given this possibility is they also provide the real prospect of 5- and 10-baggers. However these upward moves tend to occur in spurts, which would almost certainly mean that the stock would get called away from you somewhere along the way. Further, out-of-the-money covered calls don't provide much protection against the aforementioned crash-and-burn. I used covered calls in 2000 when biotechs went crazy and I had many short-term gains that I didn't want to take. In retrospect of course I should simply have sold - it's somewhat amusing to recall that the premium I got on an at-the-money 3 month call on GLGC substantially exceeded the subsequent price of the stock after the bubble burst. The other tax strategy a number of people used in 1999-2000 was to sell covered calls on their holdings and then buy them back when the stock went through the roof. They got to hold the stock but take some short-term losses. (This is essentially a tax-deferral technique - but you have to be careful of the very complex tax rules that come into play.) Peter