Portfolio strategies and March options expiration

Investing for a blog is slightly different than investing in your own real money portfolio. I try to keep things as true as possible to what actually happens -- commissions, fees, and whatever the bid/ask happens to be.

One difference is the bid/ask - the amount you can sell or buy a stock or option for. Let's look at Dendreon - on a day where the price is $32.79, that might entail a bid/ask of $32.79/32.80. You can sell it for 32.79 but have to buy it at 32.80. In a real world portfolio, you can enter a limit buy at $32.75 - if during the day the ask price falls to $32.75, the order fills and you've bought at a better price. You might not, however, get filled at all! I almost always enter limit orders so as to "game" a few cents on my entry and exit price. I do not have such a luxury in the Port24, since I wouldn't know if I ever would have gotten filled or not! And the volume comes into play also... on microcaps such as Celsion that may only trade 50,000 shares a day, a 4,000 buy can drive the ask price up by a few cents.

A couple cents here or there, even on a thousand shares, really is not a big deal - $10 or $20. Options, however, present a wholly different challenge. The bid/ask spread tends to be wider on low price or low volume stocks, and can be as large as 30 to 40 cents difference. A limit order here is MUCH more necessary and "gaming" the order is important. If the bid/ask is $0.25/0.45, a sell entered for $0.35 -- maybe even $0.40 -- might well be filled. You can easily gain an extra $20, 30, or 40 on a trade simply by keeping that in mind. On a $5,000 buy in for the stock, where you are expecting a 2% return on your covered call, an extra $25 raises your return percentage-wise by another half percent. Half a percent over 12 months is an extra 6% a year! Always enter limit orders on options!!

Another difference in the way a real vs. fake portfolio can be managed is the psychological factor. I have staked myself to a 24% return in the Port24 (something I am far short of at the moment) and being long Celsion for so long (heck, even Dendreon over the last year!) has hurt my performance when measured over an individual month or series of months. I refuse to sell calls for the most part because there is the chance for a really good movement in the share price coming up and I want to capture that. However, I have opportunity cost in the meantime of the covered call premiums foregone. And monthly, I have to report "underperformance" of my 2% a month return. There is always the temptation to do something "wrong" to make the monthly numbers look better! (This, by the way, is very much why I mistrust a lot of companies' quarterly earnings - there are many things they can do to fiddle around with a particular quarter's earnings... a one-time charge here, etc.) All I can do is remember why I am in a particular stock and stay true to it. In the long run, assuming I'm right on Celsion, a 100%+ return in a year looks better than 2% in each of 12 months.

For March's opex in the Port24, both Delcath and Seattle Genetics expired without being called. Delcath, of course, went horribly wrong a few weeks ago with the FDA not even accepting the filing of the NDA. I'm holding here, as European approval is also in the works and should cause a re-runup towards the end of the spring. SGEN could well bounce around a buck or two up or down; I will simply wait for a small bounce up and sell calls again.

One extra note about the Port24 - several weeks ago I announced the intention to "move" the assets to Zecco from Scottrade. Immediately afterwards, Zecco announced a pricing change, adding a few dimes to their stock and option commissions. While it is still cheaper than Scottrade and for a new money account I would certainly recommend Zecco, for this situation where I'd have to pay "transfer" charges I am just going to keep basng my buys and sells for now off Scottrade's commission costs. Having said that, please don't let such costs deter you from doing transfers in real money accounts - many brokerages will compensate you for the transfer charges as an inducement for your business!

Real money wise, I am coming close to being an idiot with Celsion. I have been buying all the way down from the low $3s through the $2.30s. A large part of me wishes I'd only now heard of it and had bought the entire stake here! We should finally see some movement in the next 1-8 weeks... culminating in a really nice runup by June awaiting full enrollment of the HEAT trial, and the interim calculation announcement. While I don't truly expect a successful interim and trial stop, the increased eyeballs and realization of the microscopic float should cause a share price move of several dollars.

Paramount Gold & Silver should be releasing one of their resource reports within weeks. Not knowing exactly what regions will be included makes it hard to predict share price movement, but suffice it to say over the next year I expect a double or more. That makes it worth hlding on, or adding here.

Regards,
Trond

CSLN and DNDN

I bought 4000 more shares of Celsion for the Port24 - this is only a (hopefully) quick trade as I just don't see hanging out sub $2.50 much more than a few more weeks. I also bought it in my real-money accounts this morning!

The real news of the morning was for Dendreon, even though the market is treating it with a yawn. The remaining 36 workstations at their NJ facility were approved by the FDA this morning -- which quadruples the amount of Provenge they can administer. It will be a gardual ramp up, rather than an immediate x4, but within two to four months all that capacity should be utilized.

They guided for $9-10M a month with the existing 12 stations, so we should be looking at $36M a month. later this year. That equates to $432M a year on a forward-looking basis... and does NOT include the additonal 72 workstations in GA and CA later this year. For calendar year 2013, after fully ramping up, they should be at $1.2B of sales.

Regards,
Trond

Port24 update - SGEN

Cash was freed up by selling CLDA. I am allergic to holding on to cash and have bought 800 Seattle Genetics (SGEN) at $15. I turned around and immediately sold 8 Mar11 $15 calls for $0.40 each. 2.5% return in just over 2 weeks, assuming we hug $15 for awhile.

Regards,
Trond

CLDA

Sometimes investing can be very frustrating. CLDA was north of $33, with buyout rumors swirling in the $40s. And then we get the news that they are being acquired at $30, plus up to another $6 cash based on future sales.

Huh???? With the stock at $33+?

Unfortunately the board and insiders own enough of the company that this will probably go through regardless of shareholder discontent. I sold all 600 shares in the Port24 this morning at $30.40. And I can't be too sad as we bought around $17 and made a couple bucks a shares in covered calls as well -- all in less than three months.

DCTH had bad news as well, with the FDA refusing their NDA filing. I will not sell these Port24 shares, since we have Europe coming up as another catalyst in the spring/summer. Too, Delcath will refile the NDA in the fall with the additional information requested. So this is a delay, and probably a buying opportunity overall.

Regards,
Trond