47% downside protection may not be enough for bad news. Note all of the open interest on the $5 puts, which is BEYOND your downside protection -- and those still have a 10% premium. There's also a lot of open interest on the $17.50 and $20 calls. So, a big swing is anticipated, in one direction or the other.
A few months ago, one of these dropped 80% when the FDA denial came through.
On Wed, Jun 23, 2010 at 10:28 PM, Louis <loupi3@yahoo.com > wrote:
Vivus (VVUS), a pharmaceutical company, July 6 puts have a 15% premium (.90). Since the stock is at 9.68 that represents about 47% downside protection (6-.90/9.68).
The July 5 put is at .50, a 10% premium with about 54% protection.
Obviously a very volatile stock and there are some serious upcoming FDA issues, but these are very interesting numbers.
Any thoughts?
Lou
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