As I pointed out with Arena, my “playbook” for ARNA was that it could follow the path of Dendreon (DNDN). Some of the same players seem to be involved, including even retail followers of clinical trial small pharmas.
Dendreon fell out of bed recently after its transition to treating patients. The very high cost of the treatment led to predictably slow uptake, which naturally disappointed the most optimistic of its supporters, and gave the shorts another opening to jump on the stock.
Amazingly, this time I didn’t ride the roller-coaster down (in Dendreon, at least, but Human Genome Sciences made up for that). It does, however, look like it has stabilized, so I dipped my toe in yesterday because the volatility is still beyond the stratosphere.
My play, hopefully good for 10% or so in just three weeks, was to buy the stock and sell June 7 calls. If I’m correct in my chart-reading, the stock should be north of $7 three weeks from today, and it will be called away, leaving me with close to 70 cents of profit for each share. I like it when my annualized profit amounts to over 100%.
While I’m at it, I added some more ARNA and sold January $5 calls against it. While definitely still at risk to be denied approval at the end of June, my net cost for those shares that I hope will get called away was under $3.50 per share. That would be a nifty 43% profit in eight months, or 64% annualized.