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

To: IRWIN JAMES FRANKEL who wrote (2563)10/26/2010 11:16:18 PM
From: Jeffry K. Smith  Read Replies (1) | Respond to of 3027
 
>>What I don't get about MNTA is the short interest increase.

"You might think of it as similar to covered writing."

That's just it - the covered call situation has defined, limited risk. On the other hand, shorting a stock involves (to my knowledge) unlimited risk.

If I short a stock and buy a call, I'm limiting my risk - fine. If I short a stock and sell a put above my short price, I'm increasing my basis, and covering myself to a point. There's no sense selling a put below where I've shorted the stock, so unless I've missed a possibility, I don't understand how you can relate the two strategies.

I'd sure appreciate an example of why you feel the two are similar strategies (riskwise).



To: IRWIN JAMES FRANKEL who wrote (2563)10/27/2010 8:19:32 AM
From: tom pope  Respond to of 3027
 
delta hedge the movement.

It's always seemed to me that delta hedging is more difficult in practice than in theory, unless you're on a professional desk. For the retail investor transaction costs including friction are a big barrier to successful implementation of the strategy, esp if the stock is volatile and calls for frequent hedge adjustments.


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