TRADE ALERT 4/25/14 (7:14am Pacific)
Just a quick update to modify our Affymetrix trade and place new set of trades around our Cirrus Logic position (adding more stock and another call position).
Actions to take:
- Buy 100 CRUS at “market” for the day
- Sell to open 1 Cirrus Logic Jun 21 2014 $22 call for $1.05 or better GTC
- Cancel order to sell 2 Affymetrix Jun 21 2014 $7.50 calls
- Sell to open 2 Affymetrix Nov 22 2014 $7.50 calls for $1.30 or better GTC
Comments:
Naturally, please be sure to purchase the additional 100 shares of Cirrus Logic before you attempt to write a call against the stock… and likewise, make sure your June Affymetrix order is successfully cancelled before you place the November order.
Outcome in real world account:
- Successfully cancelled order to sell 2 Affymetrix Jun 21 2014 $7.50 calls (7:31am 4/25/14)
- Bought 100 CRUS @ $21.709 (7:33am 4/25/14)
- Sold 2 Affymetrix Nov 22 2014 $7.50 calls @ $1.30 (7:34am 4/25/14)
- Sold 1 Cirrus Logic Jun 21 2014 $22 call @ $1.05 (7:55am 4/25/14)
TRADE ALERT 4/23/14 (6:55am Pacific)
Though we are sitting on some cash that could be put to work in new stock positions, I am holding off on making new purchases for the time being; however, as you can see below, I ready to attempt to write some calls against some of our existing positions.
Actions to take:
- Sell to open 2 Affymetrix Jun 21 2104 $7.50 calls for $0.90 or better GTC
- Sell to open 1 Cirrus Logic May 17 2014 $20 call for $0.85 or better GTC
Comments:
I am entering these orders as “good until cancelled” (GTC), but depending how the market acts in the days ahead, we may cancel them and replace with new orders fairly quickly if necessary.
Outcome in real world account:
• Sold 1 Cirrus Logic May 17 2014 $20 call @ $1.00 (6:30am 4/24/14)
Outlook For The Week 4/21/14
First off, my sincerest apologies for not touching base with you as last week ahead of the weekend expiration of April options! To be honest, I was caught off guard by the fact that the markets were completely closed on Friday rather than open for a half-day session as I was anticipating (I will be sure to actually pull up the holiday schedules for the major exchanges in the future!), and consequently, I missed my chance to touch base in a useful manner ahead of the weekend.
That being said, as you can see in the “outcome” section below, as expected, our TriQuint shares were called away from us at $12, and the Cirrus Logic April $20 call we had written expired worthless.
With the April expiration now behind us, we are now sitting on just under $2,400 in cash, and we are in a position to write calls against our 200 Affymetrix (AFFX – $7.27), 100 Cirrus Logic (CRUS – $19.35), and 800 of our 1,500 MannKind (MNKD – $6.29). In addition, we also still have a May $19 call written against our NVIDIA (NVDA – $18.65) position.
As those of you who also subscribe to Nate’s Notes are aware, I remain concerned that the market may be on the verge of “rolling over”… however, I will be the first to admit that if it does not do so soon, it will likely resume its uptrend, and if it this happens, we will obviously be able to collect more premium for any calls we write if wait for the uptrend to get underway.
Consequently, I am going to wait another day or two to see what the market wants to do before attempting to write any new calls or redeploying the capital that was freed up by the TriQuint exercise. Stay tuned!
Outcome in real world account:
- Sold 200 TQNT @ $12 via assignment (4/19/14)
- 1 Cirrus Logic Apr 19 2014 $20 call expired worthless (4/19/14)
A Quick MannKind Update 4/8/14
Just a quick update for you today to post the March brokerage statement for our real world account (which, as you can see in the account balance box, was generated during the major sell-off experienced by MannKind’s stock ahead of the panel meeting last week), as well as touch base on the latest development on the MannKind front.
As you are probably already aware, the FDA recently announced that it has pushed back the final review date for Afrezza by three months. Though the stock initially took a hit on the news, it has since found a bit of support in the market, but regardless of where it heads next, I want to make the following observations about the situation.
The first is that, while there are never any guarantees when it comes to the FDA, I believe the delay is actually a positive development for the simple reason that if the FDA was going to turn the drug down (still a possibility despite the overwhelmingly positive show of support Afrezza received at the AdCom panel meeting last week), they would simply do so rather than extend the review deadline by three months.
There are undoubtedly a great many labeling issues to be clarified before a final approval is granted, as well as planning for potential post-approval studies, etc., and while it would have been great to see us move from the panel meeting to a final approval literally overnight, the extension really should not come have come as a surprise to anyone (though, as you might expect, message boards were buzzing with posts from short sellers doing their best to put a negative spin on the announcement).
Secondly, while it remains to be seen whether a partnership deal ends up being announced prior to final approval or not, I believe that as the review process moves forward and it becomes more clear to Al Mann what the actual labeling will end up looking like, it will allow him to more definitively assess the terms he can reasonably expect to get out of a deal… and thus, there is a chance we may actually see some movement on this front in the weeks ahead (but again, no guarantees!).
Finally, I have to admit that I am just as perplexed as many of you about the way the stock has been acting over the past couple of weeks, and the only real insight I can share with you is that there are some very big players involved in this potentially very high stakes story… and the stock is going to do what the stock is going to (with no guarantees that the moves up or down will be rational along the way) – our job is simply to keep our eye on the potential prize down the road and make sure we are as well positioned as we can be to participate in the big move if/when it finally gets underway.
To that end, we still have a very large position in the stock, with just under half of it spoken for via the May $6 calls we have written. At some point, I plan to write calls at a higher strike price against a portion of the remainder of our position… and then perhaps use a portion of the proceeds to repurchase some of those May $6 calls (of course, the stock may head south instead, in which case, those calls may end up expiring worthless after all).
Stay tuned!
Account Statement – March 2014
*note: clicking on any of the images below will open them in a larger format for easier viewing…
TRADE ALERT 4/3/14 (7:08am Pacific)
While it would not surprise if MannKind’s stock (MNKD – $7.03) decided to make another big move one way or the other right after I post this trade alert, based on yesterday’s trading activity and the first 30 minutes of trading today, it looks like the stock will likely spend some time trading right around $7 while we wait for a final ruling from the FDA.
Actions to take:
• Buy to close 3 MannKind April 19 2014 $5 calls for $2.25 or better for the day
Comments:
Now that the panel meeting has ended – and the inflated premiums that were in the options have been removed (for the most part) – I want to buy back our nearest dated options so that we will be free to write new calls against that position in the days or weeks ahead (naturally, if you did not sell these options ahead of the panel meeting, you should not be attempting to buy them today!).
Also, just to bring everyone up to speed who may be new to The Wagmore Advisory Letter, here is a summary of our existing positions at this point in time:
Stock:
- 200 Affymetrix (AFFX – $7.48)
- 100 Cirrus Logic (CRUS – $20.84)
- 1,500 MannKind (MNKD – $6.93)
- 100 NVIDIA (NVDA – $19.07)
- 200 TriQuint Semiconductor (TQNT – $13.94)
Calls written against positions:
- 1 CRUS Apr 19 2014 $20 call
- 3 MNKD Apr 19 2014 $5 calls
- 7 MNKD May 17 2014 $6 calls
- 1 NVDA May 17 2014 $19 call
- 2 TQNT Apr 19 2014 $12 calls
Though you do not need to try to enter into new call positions based on the above, if you are working on putting together a portfolio of stocks against which to write calls in the future, the above should give you an idea of which stocks to work on adding to your account.
Outcome in real world account:
•Bought 3 MannKind Apr 19 2014 $5 calls @ $2.23 (7:27am 4/3/14)
As you have probably heard by now, the panel charged with evaluating Afrezza and making a recommendation to the FDA today voted 13-1 to recommend approval for Type 1 diabetics, and 14-0 to recommend approval for Type 2 diabetics.
This is a huge deal for the company (and shareholders!), and you are to be commended if you had the nerves and patience to establish a position and hold it through the craziness we have had to endure for the past two days!
As mentioned yesterday, though I felt confident things would work out in our favor, I couldn’t in good conscience leave our very large (relatively speaking) position virtually unhedged (especially when this is supposed to a more conservative newsletter than Nate’s Notes)… and consequently, we took advantage of the juicy premiums that were available yesterday to write some more calls.
As a result of this action (and today’s panel vote), for better or worse, two-thirds of our position may now be in jeopardy of being called away from us in the next few days or weeks.
However, I think it is important to note that a) we do still own 500 shares “free and clear,” and b) between the cash we raised selling the calls on the other 1,000 shares and cash we could raise selling additional calls at higher strike prices if the opportunity presents itself in the days ahead, we may be able to buy back a portion of the calls that have been written at the $5 and $6 strike prices to keep those shares in our portfolio a bit longer.
Of course, there is also a chance these calls will be exercised sooner than their expiration dates, and if this happens, we will then have a choice about how to redeploy the capital.
I’m sorry I don’t have any specific trades to share with you tonight (it would be foolish to list any without knowing what the stock will actually do tomorrow), but I did want to get something out to you before I went to bed to both say “congratulations,” as well as to let you know that once I have a chance to see where things open tomorrow (and how the stock is acting after some time has gone by), I will start to formulate a plan for our existing calls (as well as new ones we might write).
Stay tuned!