Time to check in on my drug speculations.
Elan is behaving as though the market thinks uptake will continue with Tysabri. The shares I bought in the mid-$4’s when an oral treatment was approved have gone up a buck or more, so I’m hoping to see the position shrink by having calls exercised. At this point, my position will get one third smaller in two weeks when the October options expire.
Arena, on the other hand, is proving itself a true dog. Still, even dogs have their day. For this one, it’s looking like $1.50 per share is working as a trading bottom. The volatility premium in the options has gone down even faster than the stock, however, so I haven’t written the calls on it that would mitigate my losses.
Just to mention a third among my little collection of these speculative pharma’s, SNTA has been rallying nicely lately, and I found myself moved to write a gaggle of February $5’s against the position in one of the accounts. I got over 50 cents a share for those calls, which is not bad for a $4 stock.
Just be careful when you look at these, because, as ARNA proved so well, $4 stocks can become $2 stocks. On the other hand, DNDN showed us that $4 stocks can become $40 stocks.
What’s a mother to do?