Today's trades and new Port24 additions

I have two trades for covered call fanatics, today. PIP and VHC both have very good arguments for a trade which yield 14 and 8%, respectively.

PIP is trading at $2.74, with the Aug11 $2.50s selling for $0.65. You'll end up losing 24 cents on the shares, if exercised, but gain the 65 cents on the option, netting 41 cents profit per $2.74 share - over 14% for a month. On the downside (especially important to note if they lose their lawsuit) you are "protected" down to $2.09.

VHC is trading at $34.55 with the Aug11 $35s selling for $2.80. That is an 8% dividend while you wait, with an extra 1% of capital gains if exercised.

I think both of these will end where they are, or higher, on 8/19/11.

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On the Port24 front, I miss having NBIX already, but will not buy in again here.
I bought 2500 CORT at $3.82, 6000 PPHM at $1.78, and 1800 ZIOP at $5.87. I am trying to buy lots of stock that end up somewhere around $10K at a whack.

I sold 20 Jan12 $2.50 calls against 2000 of the 6000 PPHM (Peregrine Pharma) for $25/contract. This is about a 14% return for the 6 month period, with an additional 40% return if exercised. I LOVE this risk/reward ratio, especially since I've only sold options on a third of the position. If the price rises into the $2s again, I will sell more, at much higher premiums.

I also sold 18 Aug11 $6 calls against the ZIOP (Ziopharm) for $25/contract. While "only" a 4% return for the month, I am more than willing to either lose the stock if over $6, or rinse and repeat under $6.

CORT (Corcept) is a stock I will hang onto for a couple months, assuming there will be a runup into the $5s or more as the FDA PDUFA date approaches. I'll sell calls at that point.

Port24:
19.8% annualized return (since 5/14/2008)
$5,468.80 in cash
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)
2500 CORT (0)
6000 PPHM (20)
1800 ZIOP (18)

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)

Pharmathene (PIP)

PIP had a great day today, up 26%, to $3.04. This is the stock that I bought yesterday in the Port24 (and in a real money account).

I touched months ago on the topic of having watchlists of stocks, that should be reviewed daily to weekly. Once you have a feel for where the stock price tends to move (and of course, knowledge of the timing of upcoming events), you will get a feel for when a stock is simply insanely priced. It's worth reviewing Benjamin Graham's (and Warren Buffett's) continuing referral to Mr. Market: that silly little guy who shows up every day either manic or depressive, offering stocks for sale at wildly inflated prices because he's so rosy, or at crazily depressed prices because he's glum or convinced the sky is falling. The trick is that YOU DO NOT HAVE TO BUY AT ANY POINT - it is entirely up to you. You can agree with everyone that Apple makes the best listening or tablet devices, but until there is a shock to the stock price and it's offered at something you consider value, you don't have to buy it! Yesterday was simply a time when PIP was being offered at a price that was entirely "glum" Mr. Market.

Recall however that I also sold July $2.50 calls against the position I added yesterday (within the Port24). Although I've technically "lost" paper money on this trade, as opposed to simply buying the shares, I am not too sad. I entered the trade looking only at the one month objective of gaining the 12% (144% annualized!!!) return should PIP be at more than $2.50 on July 15th. I am quite firmly convinced it will, so I am not touching the trade at this point.

Please note there IS something I could (and may well) do at this point. I bought the stock at $2.42 and sold $2.50 calls for $0.30. I could buy back those same calls for $0.80 now, and then sell the stock for $3.04. I would lose $0.50 per share on the options, but gain $0.62 per share on the underlying shares. Of course, you have to factor commissions into the above, so it's not a full 12 cent gain per share... maybe more like ten on average.

That would be a 4% gain, obviously not nearly as nice as the 12% I stand to gain if left in place. On the other hand, this is a 4% gain in ONE DAY. That annualizes to 1,440%! Such comparisons are silly when you talk about a one or two day gain, but then I have that cash on hand for future trades, instead of locking it up for a month. Since this trade is about 8% of the entire Port, there is some interest in closing it out quickly if I can do so at a better than already-planned return.

Stay tuned!

Regards,
Trond

Options expiration fallout

The composition of the Port has changed dramatically from just a couple weeks ago.

We bid adieu to Seattle Genetics (SGEN) last Friday, as I had sold $17.50 calls and it closed at $19.50. Since I bought it 3 1/2 months ago at $15, and sold $1.25 worth of premium I can't complain too much with the 21% total return.

This morning I took advantage of the cash on hand, buying an old friend and a special situation.

The Port now owns Dendreon (DNDN) again, at $38.16. I did, however, sell July $40 calls, expecting a lift from the CMS coverage and the upcoming Seal Beach plant approval.

I also bought a second load of Pharmathene (PIP) (6,000 shares at $2.42) and sold 60 July calls at $2.50. Those calls, however, had a premium of $0.30!! That is a 12% premium for one month... and too much for me to resist in the Port.

Notably, I also bought some PIP for myself in my real money account this morning. I did not sell calls against these.

I'm down to $4,400 cash in the Port, so until I either sell more calls or liquidate some stock, I'll be holding the following:

Shares .. Ticker.. (calls sold)
1500 ARQL (0)
1200 BTX (0)
2600 CLDX (0)
9000 CLSN (0)
1600 DCTH (0)
300 DNDN (3)
1100 EXEL (0)
2000 MITI (0)
2000 NBIX (20)
7000 NNVC (0)
2500 PIP (0)
6000 PIP (60)
1600 SGMO (0)

Regards,
Trond

PZG sell

Paramount Gold & Silver had a modestly good PR today and I've decided to sell the 3,600 shares the Port24 holds (at $3.71). That gives me an 18% return over the five months I have held.

I still like PZG but will look to re-enter somewhat lower ... the next news is not expected for a few months and I suspect it will trail down again.
Others I'm considering for inclusion at today's prices are more SGMO or PIP. VHC and ZIOP are also contenders.

Regards,
Trond

Port 24 update

With the cash from the recent exercise of ONTY burning a hole in my pocket, I had some decisions to make.

NBIX is trading at a good price for a buy, but I already have nearly 10% there.
I was tempted by some more DNDN but I think this summer will see a better buying opportunity.
CLSN is a recurring temptation too, but I have the largest position there (and in my real money accounts) so I'm avoiding that too.
LXRX was also a possibility, but they are not optionable, and I also own NNVC in the Port that does not trade options.

So I decided to buy 2500 PIP and 1500 ARQL.

PIP is embroiled in a lawsuit against SIGA for licensing rights to a drug. From my readings it appears they have a very reasonable chance to win here - at $3.70 this is going to either be cut by a quarter or nearly triple. Much riskier than I typically would want for the Port, but I like the odds and also own this in real money accounts. You can research recent articles by James Altucher about this stock.

This is the second appearance by ARQL in the Port24. In September of 2008 we bought it at $2.91 and then eight months later said adieu to it at $4.43. Now I'm buying again at 6.70, in the expectation of a decent runup through the fall for trial results next year.

Surprisingly, I am not selling any calls right now. The premiums just are not there - we actually are wanting some shakeups in the market - volatility will move the premiums up.

Still have $9,599.35 in cash, and the positions listed below. I've dropped to a 17.5% annualized return, but at least against a negative 0.6% comparable to the S&P and a 5.6% against the Nasdaq.

2600 CLDX (0)
1200 BTX (0)
2000 NBIX (0)
7000 NNVC (0)
1500 ARQL (0)
1600 DCTH (0)
3600 PZG (0)
9000 CLSN (0)
2000 MITI (0)
800 SGEN (8)
2500 PIP (0)
1600 SGMO (0)