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Strategies & Market Trends : Synthetic Derivatives -- Ignore unavailable to you. Want to Upgrade?

To: CapitalistHogg™ who wrote (441)	9/21/2006 2:48:19 PM
From: CapitalistHogg™	Read Replies (1) \| Respond to of 464

Premiums for NRPH are sky high ivolatility.com and because we have linked the high premiums to an actual event we know an approximate timeframe to be in the trade. How do we play it? Well depending on your own risk tolerance and due diligence I would suggest one of three things. 1) A short straddle in October at the wings. There is a strong possibility of getting the entire premium because of the open ended nature of the DEA's review. If they don't give an answer before October the premiums will plummet to their intrinsic value. 2) A long call and/or put calandar spread. Again the short front month would pay for the long further dated options especially if the DEA does not give an answer by October. 3) An unhedged play on the common. This is where more DD on your part would be helpful. For example I would probably determine that the option OI is bullish and go long the stock. OR one could research this chemical structure and determine if the DEA has a history of favorable or unfavorable decisions regarding this particular chemical make-up (I have no idea at this time). Anyways I have seen enough of these things to know that as a general rule of thumb open ended decisions usually take longer than what most players/analysts believe. I personally would choose the Calendar spread as it limits exposure and still leaves the possibility of large gains.