July options

Oops, neglected to update the options expiration on the Port24 last weekend!

I had four stocks with calls sold against them - DNDN, EXEL, NBIX, and PIP. Dendreon and Exelixis expired under the strike price, so I retain the shares. NBIX and PIP were called away (although I retain some extra PIP, as I did not sell calls against the entire position).

The Port positions are shown below; I have $35,397.31 in cash with a 20.5% annualized return as of 7/22/11.

I do expect Celsion to continue its run; HEAT enrollment and the 190th PFS event should occur within 3 weeks now. I intend (in the Port24) to start taking some profits around the $5 mark - I'd bought lots around $2.64 and $2.31.

Regards,
Trond

# / Ticker / (calls sold)
1500 ARQL (0)
1200 BTX (0)
2600 CLDX (0)
9000 CLSN (0)
1600 DCTH (0)
300 DNDN (0)
1100 EXEL (0)
2000 MITI (0)
7000 NNVC (0)
2500 PIP (0)
1600 SGMO (0)

May options expiration

There were certainly some surprises this last month in the Port24. I had sold covered calls against CLDX, ONTY, NBIX, DCTH, and MITI.

All expired harmlessly except for ONTY - it has been rising sharply and were exercised a good 25% above my $4 strike. It hurts to lose the extra amount I might have made, except for two things:
1) would I have actually sold at this price, or would I have sold earlier, or waited and had it go down again?
2) I bought these about a year ago with an average price of $3.46, and sold $0.70 cents of premium along the way... so my net return here has been around 35%.

CLDX just did a secondary offering which knocked it down from exercisable range to the present price. I expect it to be nudging $4 again within a couple months.
NBIX has dropped recently but with Phase 3 trials starting late summer, it should be climbing nicely over the next few months.

Celsion (CLSN) enrollment in the HEAT trial continues to be something I look forward to, over the next two months. They should have hit the 190th PFS event easily by this time and so we'll get to know the results of an interim calculation by the end of Q3 at the latest.

The Port has an annualized return of 17.1% with just over three years. That compares nicely to the S&P being flat over the same period and the Nasdaq gain of 7%.

With ONTY being exercised, I have $28,913.35 in cash and the following holdings:

Shares (calls sold)
2600 CLDX (0)
1200 BTX (0)
2000 NBIX (0)
7000 NNVC (0)
1600 DCTH (0)
3600 PZG (0)
9000 CLSN (0)
2000 MITI (0)
800 SGEN (8)
1600 SGMO (0)

Another covered call sale

On Friday I sold 20 NBIX calls - the May $8s - for $0.25 in the Port. That brings us up to a 16.5% annual return and rapidly closing in on three years of the Port24. I have the holdings listed below. Of them all, the only ones I would consider buys right now are Celsion, Nanoviricides, and Paramount Gold. I would expect PZG to release their first resource report this coming week, and will probably sell out of the Port when that occurs. I have quite a few shares of PZG in my real-money accounts, however, and will only sell modestly there... I think 2011 will be a great year for PZG. Nanoviricides may not have any news for months but then again it may announce something any time. I wouldn't add massively today, but to start a position it's a great time in the $1.20s. Celsion also may not move for a couple months but it really is time to fish or cut bait here. By May or June it will have started its runup, and I expect to have a double from here by the end of June. Regards, Trond Port24 holdings (calls against) 2600 CLDX (26) 400 DNDN (0) 2000 NBIX (20) 7000 NNVC (0) 7000 ONTY (70) 1600 DCTH (0) 3600 PZG () 9000 CLSN (0) 2000 MITI (0) 800 SGEN (0) $1,814.37 cash

Careful does it! And a Port24 update

I am hearing from all the various economists, bloggers, and folks I respect (market-wise) that we are due for a correction. I asked a month or so ago if you had your chair ready for when the music stops. I think you need to ask yourself that question again.


I put on one of my volatility plays last week: took TZA (bearish x3 small cap ETF, was at $15.04 at the time) and bought an equal number of Apr11 $15 puts and calls. I don't care what direction we go, as long as we move at least 4% in either direction in the base (~11-12% in the x3).
Though honestly, if we move up (down in the ETF, since this is bearish) I will probably sell the puts if they near a double. I'd hold on to the calls, as they will go up if we do get the correction I fear.

In the Port 24, I bought 2,600 Celldex (CLDX) this morning at $3.88 and sold the May $4 calls for $0.55 against the whole position. CLDX could well continue falling here, but May gives me a while to be right.

With this morning's prices, I'm currently at a 14.2 annualized return and still have $14,160 in cash to initiate another position.

In real money accounts, I'm very interested in PZG, DCTH and NBIX here.

Regards,
Trond

Port Update

Sold the 4000 GNVC, as planned yesterday, and at $2.88. It is higher today, and it killed me to do it, but I really do want stocks that can have calls sold against them, in the Port. I mostly want to make money here, so if I see something enticing enough, I will buy non-optionable stocks, but the ground rules are there for a reason!

I looked at the other holdings of the Port this morning and nothing appeals to me in terms of selling calls. I have a bunch of cash, and Oncothyreon (ONTY) happens to be a watchlist stock that had bad news this morning. I bought 3,000 shares at $3.41 (and 1k in my real-world IRA at $3.45, earlier) - I'll let the share price shake out a little and then sell calls against them.

So now the Port is comprised of

2000 AOB
2000 NBIX
1600 ELN
400 DNDN
4900 ARNA
2500 SGMO
1000 MELA
200 AMAG
1500 ALTH
3000 ONTY
with $21,585 of cash.

I'm at a 30.8% return in nearly two years, a 16.6% annualized rate. The S&P 500 over that time has returned -7.3% and the Nasdaq has returned 9.3%.

Regards,
Trond

Port 24 and assorted biotech news

Port 24 update:
The only January options I had sold were 10 MELA $10 calls, and they were exercised, with the stock at $11.05 last Friday.

With that cash, I bought 300 more Dendreon shares today, and sold 3 Feb $32 calls against them for $0.89 per share.
I am living by my resolution to be a little more active in the Port! I also sold the following calls today:
16 ELN March $9s for $0.30
15 SGMO Feb $7.50s for $0.25
10 MELA Feb $12.50s for $0.20
2 AMAG Feb $55s for $0.50

I almost sold calls against ALTH - but I feel there is a little more room beneath the stock before selling calls. AOB needs to climb closer to $5 to make it worth selling calls, and NBIX at $2.50 is not satisfactory to sell the $2.50s, and the $5s are not worth anything yet.

The Port 24 thus has the following stocks (covered calls in parentheses)
1500 ALTH
200 AMAG (2)
2000 AOB
4900 ARNA (24)
700 DNDN (3)
1600 ELN (16)
1000 MELA (10)
2000 NBIX
2000 PGNX (20)
1000 RMTI (10)
2500 SGMO (15)
.. with cash of $2,680. This gives me a port value of about $132,500 and a 19.3% annualized return. I'm getting closer to my 24% return, again!

Stocks:
Genvec released a PR that they have licensed their hearing loss pre-clinical work to Novartis, for $5M plus milestones and royalties. They also hit the 184 death interim trigger in the PACT trial on Friday, and will have data in 10 to 12 weeks. I'm nearly as excited about Genvec as I was about Dendreon, but caution that the risk/reward is much slighter here at $2 than at $0.76 when I first mentioned it here a few months ago. I was still buying in my real-world IRA at $1.70, but am probably done for now.

Dendreon had an interview published in the Xconomy online magazine with the new COO Hans Bishop. It is a MUST READ, here: http://www.xconomy.com/seattle/2010/01/19/dendreons-new-operations-man-hans-bishop-aims-to-keep-provenge-trains-running-on-time/

Sangamo had good results (albeit from one patient, in a Phase I trial) here: http://finance.yahoo.com/news/Sangamo-BioSciences-Announces-prnews-1693198508.html?x=0&.v=1

Regards,
Trond

Happy New Year

Thanks to all who read this - I have not been good about keeping up posting, or even the Port 24. I shall strive to do better in the new year, as I want to bring my returns back up to the 24% level.

I am closing out the year with a few calls being sold in the Port. 24 Arena Feb $4s, 10 Electro-Optical Jan $10s, and 20 Progenics Feb $5s ... all with a monthly return of about 4%.
I will be ending 2009 with an annualized rate of return of about 13% - good, but far short of my target. I do take comfort in the fact that I ignored the Port for long stretches of time and would have made a few more percentage points on the calls I neglected to sell.

My worst move this year was to not sell ARNA on the spikes. That cost me around $20,000. Of course I would not have sold at exactly the high point, but I really should have lightened up. On the plus side, I did exactly that with BioCryst - buying low, selling high, and selling a lot of calls in the interim. Dendreon was the clear winner this year - going from around $5 to the current $26.

Next year should see Dendreon achieve FDA approval for Provenge, Electro-Optical gain approval for MelaFund, partnerships for Arena and Neurocrine, and significant appreciation for Elan, Amag, and Allos. I find myself hoping that GenVec starts trading options as I would love to have some GNVC in the Port.

May everyone have a fun and safe New Year!

Regards,
Trond

Watchlist

I desperately need to update my watchlist - I hope to have some time this weekend to do so.

I am very bullish on several stocks at this point - I'd have looked like a genius if I'd pointed out Sangamo yesterday ($6.30, up 16% today...) but there are a number of others too. SGMO, by the way, IS a watchlist stock and I will have an updated "buy under" price this weekend. I think it may give some back tomorrow, so I wouldn't just grab some today.

Allos (ALTH, $5.88 today) is one stock that I expect to be at or over $10 in the next 6 months or so. They have an approved drug, aggressive pricing, and a low number of shares outstanding (relatively). The worst case would be a buyout at a 10-20% premium.

Neurocrine (NBIX, $2.16 today) is another that SHOULD have news in the next 6 months that will propel it to at least a double and perhaps more. Several trials will yield news and a partnership awaits. I unfortunately have thought this for a few months now and have been buying steadily all the way down. Time will tell but this is rapidly becoming one of my larger stakes, just from the risk/reward.

GenVec (GNVC, $0.93 today) is the final one I will toss out - again, interim trial data expected within 6 months and the data should be really nice. Not good enough to file with the FDA immediately, but good enough to attract partners and/or suitors.

All of these (SGMO, ALTH, NBIX, and GNVC) should be 50% or higher in the next 6 months. I will make a note to revisit this post in May 2010 - I invite you to do some research on these companies and ask any questions you wish.

Regards,
Trond

Port 24 update and real-world trades

Well I did not get a chance to post yesterday but I made some changes in the Port.

I sold the last 400 BCRX, bought 2000 PGNX and 1500 ALTH, and sold 10 MELA calls (Nov $10s, for $0.40).

BioCryst is close to either getting an Emergency Use Approval or not. I would miss the price spike, but I also will miss the cratering if it does not get it. This Port is not for extreme trading -- I will definitely focus on biotechs (simply because that is what I follow for the most part) but the covered call strategy works perfectly by buying into biotechs, selling calls against the premium generated by trial or approval hype, and then selling BEFORE the actual date.

In my real-world IRA, I have been buying NBIX ($2.74), PZG ($1.27) and MNKD ($5.13). All of these are, in my estimation, good for a double or more in the next 12 months.

The Port stands as follows:
2000 AOB
2000 NBIX
1600 ELN
400 DNDN
4900 ARNA
2500 SGMO
2000 MELA (10)
2000 PGNX
200 AMAG
1500 ALTH
Cash: $5,231.55

Regards,
Trond

Port 24 update

Well, it has been exactly one year since I started the Portfolio 24.

It is a model portfolio starting with $100,000.00. I had expectations of making 2% a month, utilizing a covered call strategy. For the year, I fell well short of that, with the Port being worth $89,560 with today's prices. That is an actual 10.5% loss, or 34.5% below my desired return.

While I could use the overall miserable performace of the market (for example, the Nasdaq was down 32 percent and the S&P500 was negative 35% for that one-year period) as an excuse, I prefer to view this as an absolute return portfolio, not a relative. In other words, I do not want to simply beat the market returns, I want to ALSO always make money.

Three things hampered me.

1) Elan absolutely killed me; I bought 800 shares right before the disastrous duo of the ICAD presentation/PML cases. That is a $21,000 mistake at this moment, which would put me at a 10% gain on the year if I had not done that one purchase.

2) I neglected the Portfolio all fall and through the spring. I would have made "some" option premium if I'd been paying attention and selling some out-of-the-money calls. In no way would I have clawed back to even, but I probably left a minimum of $4,000 on the table.

3) I went away from the original strategy somewhat by stocking up on Elan and Dendreon. It worked quite well in Dendreon's case and not so well in Elan's. And it wasn't even the fact I was adding those two names in bulk; I refused to sell calls against them because I didn't want to be called away from perceived large gains.

I bought 1400 shares of BioCryst Pharma today at $2.47, and sold 10 June $2.50 calls for $0.50 -- a nice 20% premium for one month! I also sold 20 $22.50 May calls against Dendreon -- they expire tomorrow and with the stock at $20.90 I think it free money. Granted, the contracts were only $8 each but it came to $130 after commissions.

So right now, the Port stands at $89,566, with the following holdings:

3000 ARQL, 2000 NBIX, 1600 ELN, 2000 DNDN, 2000 ARNA, 2500 SGMO, and 1400 BCRX; $614 in cash. I have 20 Dendreon May calls sold and 10 BioCryst June calls sold. Next week after options expiration I will be more active!

Regards,
Trond

Doom and Gloom

This is a bunch of doom and gloom.

I am usually pretty optimistic, but I have to call it the way I see it. (I am indebted to a number of posters on the InvestorVillage website for their views, which are reflected below and I have bought into) There are certain things occurring in the market, economy, and world that I propose are not being taken seriously enough by the pundits and commentators that most people seem to listen to.

In some ways, this is not their fault.

• From a psychological point of view, “the only thing we have to fear, is fear itself”. If a continuing litany of bad news is the only thing that we are fed, then of course we’ll see a self-fulfilling prophecy.
• Too, as I have mentioned previously, some of the media seems to be “captured” (inasmuch as they are spoon-fed articles of interest from major wire services or hedge funds who have agendas).
• Finally, they WANT to believe we are on the road to recovery. They see their own 401(k) balances headed south, and believe the mantra of cyclical bull and bear markets. After all, we’re in the 16th month of a recession and the average only lasts 11 (since WWII) months.

So why do I hang my head and join the bear crowd? (First, let me state that I do not believe in the Armageddon that some folks say is coming. There are always people who say one should buy canned goods, seed crop, and guns. We will get through this! But it will be months and possibly years longer than most people think)

The market is still overvalued. Everything occurs in cycles – we just finished with a massive bubble and need to see much more downside before we come close to an average. Based on earnings or dividend yield, you can make the argument that we will still see the indices go about 20% lower. Good times tend to be better than expected and downsides tend to be worse than expected.

Specifically within the markets, banks are nowhere near to finished in terms of writing off their bad loans. I have heard they've only written off half of the toxic junk still on their books. And this is the famous slippery slope – when more bad news about the banks and loans appear, downgrades will drive them even lower.

Consumer confidence is shot, and yet investors are not yet at the point of “capitulation” that truly marks the bottom of a market. Every article I read and every market-oriented conversation I have is centered around the question, “When are we going to hit the bottom so I can invest the cash I have ready?”
I have news for you – until we are at the point where the masses are truly ready to swear off stocks entirely, we have not hit bottom. Your grandparents, who lived through the Great Depression and only wanted CDs and savings accounts: that is the kind of capitulation I am talking about.

With stock markets in the tank – guess what the next big emergency is going to be? Pension Funds. They have been trundling along, using rosy projections about 10%+ returns, allowing them to underfund their liabilities. Now the piper is awfully close and we have nothing to pay him with. The Chicago Transit Authotity recently had to float $2 BILLION in bonds to cover their pension payouts, and now are underwater not only on the pension payments, but on the debt service as well. California had budget problems this last winter and when state and local public employees realize their pensions are at risk too, we will see some very angry public servants. We'll also see some very angry taxpayers when they are asked to make up these deficits!

We simply have too much debt still on the books – not only as a country but as individuals. The home is not the ATM it has been in the last few years, credit card companies are tightening requirements, raising rates, and lowering limits as we speak. The Fed recently said it will buy $300B of treasury bonds to get some more liquidity in the market: for one thing this will have to be an off-the-books move, as my last post shows – they only have equity of about $44B. The second impact this has is that again the piper will have to be paid at some point – drastic inflation and higher taxes will invariably follow.

Speaking of homes, not only will they not be useful as a method to pull equity from, but it looks like home prices will continue to fall. The historical average of home price to annual salary is 3:1 – we are still at about a 4:1 ratio now. That means home prices will have to fall by another 25% to get back to the historical average. And recall my point about cycles – to get back to an average, we need to go below the average to allow reversion to the mean. Does that mean home prices will fall another 50%?

Unemployment is perhaps the scariest of all the scenarios to talk about. The latest numbers show a rate of 8.1%. Unfortunately, the commonly used measure of unemployment is the U3 rate – which leaves out folks who are either underemployed or have ceded to despair and stopped looking for work. The “real” rate (known as the U6) now stands at 18%. Nearly one out of five people who want to work are unable to.
Here's a very strange and possible additional outcome: governments will decide to reduce prisoner counts to lessen their costs. Inmates are NOT counted in any measure of the unemployment rates. When released, they will start looking for work and thus will INCREASE the unemployment rates. It's estimated that 0.7% of our population is incarcerated – if 10% of those (the non-violent, victimless, and marijuana-related prisoners) are released we may see an extra 1% rise in the unemployment rate!

Chickens will be coming home to roost. The United States has affected the global economy already – commodity prices have dropped, credit markets worldwide have tightened, and worldwide stock markets have dropped. In turn, we will soon be affected by the world. China has been a large buyer of our treasury bonds; do you think they are going to be pleased about the extra $300B just floated? With all the decifit spending Obama is proposing, we are coming to the point where I fear for the world's faith in our currency. And Obama is just too damn honest about things – at some point he will be forced to admit that his ambitious plans (healthcare, energy, education, as well as the stimulus bill AND all the bailouts given under Bush's and now his administration – oh, and wait until he announces that he is all set to fix Medicare and Social Security!) will require additional taxes. Hmmm... do you feel like going back to the consumerist mentality with THAT hanging over your head?

One last note about the rest of the world – foreign banks are about to hear a certain horizontally-challenged lady singing. Western European banks have lent extraordinary sums (*our* banks aren't the only ones who can over-leverage themselves, you know) to Eastern European countries. Austria's national bank, for example, has lent 70% of its GDP to eastern-bloc countries. They may be bankrupt within a year.

Oil traditionally spikes during the summertime. Can you imagine the pain we are going to experience with the 1.3 million additional unemployed folks this coming summer and a return to $4+ gasoline? Food prices will again climb, as it costs more to transport all the raw and finished materials. People buying less of everything except foods and necessities mean that more retailers go out of business. So what follows that? Commercial real estate will start slipping away too. If you see $4 gas, start thinking about selling your commercial REITs that pay such a lovely dividend.

Bernie Madoff not only set a new record for thievery on a global scale, but may have ruined an entire generation of charitable trusts. Several well known and well endowed charities literally had ALL assets placed with dear ol' Bernie and are now defunct. Everything from soup kitchens to rehabilitation clinics have disppeared, overnight. That adds to not only the general misery of the least fortunate, but may increase the crime rate.

It is not a pretty picture. (Even with the foregoing, I personally think we will work our way through this within three to four years) But in this next few years, I urge you to proceed open-eyed. If two years ago (and I was in this camp myself) you did not think it possible to have the world in the situation we find ourselves in now, what are the chances that you are going to be right about what happens in the next two or three years?

• Take steps to protect the cash you have on hand now.
• Dollar-cost average your way into stock indices (if you have dispoable income AFTER assuring yourself an emergency fund).
• Possibly buy some oil ETFs over the next month to time the coming gasoline price spikes in summer.
• We most likely will have a “bear-market rally” in the next two to three months. I do not believe it will have legs.
• Personally I will take the opportunity to sell some of my individual stocks if they do bounce, and hold on to more cash than I am used to (30 - 40% or so).
• I never would have thought it, but I would even be tempted to buy into a gold ETF if gold drops below $800 per oz.
• Longer term? Short ETFs and SPY/QQQQ/DIA puts, IF they get a bounce by summertime. I do not think the market as a whole will recover for at least one more full year – late summer of 2009 is my prediction.

On an individual basis, I still like Dendreon for the next few months. We'll know in less than 40 days now about Provenge! I like the odds – if the final results are statistically significant, we will see an enormous jump – from $4 today to probably around $20. If not, there is still almost NO chance that the results will be worse than the interim 20% reduction in risk of death over placebo we saw at interim, and the company has signaled they will still refile their BLA with the trial as supportative.

Elan may not move for 4 to 6 months. Tysabri is not increasing with the vigor that I assumed, there will be no Alzheimers news for months, and the market is eying their debt nervously. I actually think it will fall a bit from here, and then recover in the fall. If it goes below $3 I'll be buying hand over fist.

Arena may be the quickest short term play. Results for their obesity drug are due at the end of March – I see the price as very volatile next week and from the present-day $4 I think we'll see $5+ -- a one week 20%+ move would be quite welcome right now!

Discovery Labs is a gamble but also should have some very short term volatility – buys anywhere near $1.10 and sells anywhere around $1.50 until mid-April.

Neurocrine Biosciences is just teasing now. Are they ever going to partner? I will sell when we get a partnership agreement and wait for it to settle with the rest of the market before buying back in.

Finally, Sangamo is very attractive now and perhaps the longest wait of all. I honestly think they'll be bought out within two years, probably at a very nice premium.

Regards,
Trond

Finally - Port24 Update

Let's see where we're at, about two months into the Portfolio.

On 7/3/08 I had bought 400 Syneron for 15.04 and 400 more Elan for 33.70. So, I now have the following stocks (number in parentheses are the number of calls sold against them)

2000 SUPG (-20), 2000 NBIX, 600 ELN, 2000 DNDN (-10), 1200 TASR, 2000 ARNA, 1000 SGMO, 500 CRME (-5), 400 NVDA (-4), 400 ELOS
Cash balance is at $13,518.90, and the total market value is $100,875.92. That is a .87% return so far, which is obviously below my target. In my defense, I still have a number of July calls to sell -- which I hope to do today (time permitting at lunch!).

Supergen, Nvidia, and Taser are my biggest disappointments so far; Supergen missed on a clinical trial for Dacogen, Nvidia had a horrible quarter, and Taser lost the first lawsuit (out of 71 verdicts so far). Honestly, I will probably buy back the Supergen calls at a profit, and sell Supergen and Taser at a loss. I will make a final determination next week...

Elan is the biggest winner so far, having bought two sets of Elan that I've kept at $27.30 and $33.70, and the price now being $36.82. I am looking to crest $40 at the end of the month and depending on a spike, if any, following the ICAD results I will probably sell more calls on these shares at the next-higher $5 exercise price.

Regards,
Trond

Another Portfolio 24 trade

I won't bother with listing all the costs + commissions in every entry. What I'll do is list what I bought/sold, why, and the total portfolio at that point.

Bought 2000 NBIX at $4.63 and sold 10 Jun08 $5 calls at $.20.
Bought 400 ELN at $27.30 and sold 2 Jun08 $28 calls at $2.50.

It kills me to sell calls against Elan (ELN). They will likely be coming out with positive results for their Alzheimer's drug this summer and I think it likely the stock will soar. That said, 7% for just over a month is kind of nice too. But I'm only selling against 200 of the 400 shares I bought.
Neurocrine (NBIX) is expecting a lucrative partnership agreement sometime this summer/fall. That is why I am again selling calls against only half of what I bought.

Cash: $76497.98
Positions:
2000 SUPG, -20 (Jul08 $2.5)
2000 NBIX, -10 (Jun08 $5)
400 ELN, -2 (Jun08 $28)

Regards,
Trond