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Biotech / Medical : Momenta Pharmaceuticals Inc. -- Ignore unavailable to you. Want to Upgrade?

To: DewDiligence_on_SI who wrote (2549)	10/25/2010 1:47:48 PM
From: tom pope	Read Replies (1) \| Respond to of 3027

Good point, if you expect MNTA to fall by more than the amount of the premium. Using the DEC 15's as an example, the stock would have to fall to 13 for the position to go negative.

To: DewDiligence_on_SI who wrote (2549)	10/25/2010 3:18:11 PM
From: IRWIN JAMES FRANKEL	Respond to of 3027

>>My question is: Why would anyone want to sell flood insurance when they know a Category-5 hurricane is indeed coming? There are a few reasons: - generate income - defensive hedge - play the volatility (high IV) When MNTA weakened after an asymptotic peak, it seemed some hedging was reasonable. So far - so good. There are lots of fun things you can do with options. When DNDN dropped into the 20's I started buying shares ~27 and continued to ~24. Then as it stabilized, I started selling puts near term at 27 and 28. When the stock rose to 35 I sold near term calls at 40. When the stock hit 40, I sold the stock, bought back the calls and let the puts expire worthless. That all happened in a little over a month. The gains were twice what they would have been in stock alone. I often like to sell both calls and puts, knowing that only one can bite me. :-) When you do options expiring in about a month - it is amazing how fast they become worthless. I have been doing options since 1975. As to writing covered calls, you may see the hurricane coming and be able to close them out. I generally set a plan to close them in the event the strikes are challenged. You can often stage out, absent a sudden move and still make money on the options AND keep the gains in the stock. ij