Recent Articles
Medivation Stock Drops 67%
Mar 3, 2010 Company News, Stock to watch Leave a comment
Shares of Medivation (MDVN), sold off rather dramatically today, with the stock dropping from $40.25 to $13.10, a loss of 27.15%, after the company announced that an Alzheimer drug, Dimebon, that it is developing, did not show any “statistically significant improvements” over a placebo group, in a drug study and failed to meet its primary and secondary endpoints, with those endpoints being “cognition and global function.”
Medivation is developing the drug in partnership with Pfizer (PFE), which saw its shares drop 1.59% on the news.
In a press release issued by the company, the company’s CEO, Dr. David Hung, stated that, “the results from the CONNECTION study are unexpected, and we are disappointed for the Alzheimer’s community. We are working with our colleagues at Pfizer to better understand the CONNECTION data and we plan to present these data at an upcoming medical meeting.”
Novell Up After Hours On Takeover News
Mar 2, 2010 Mergers & Acquisition, Stock to watch, Stocks On The Move Leave a comment
Shares of embattled network software maker Novell (NOVL) are rising in after hours trading, on news that hedge fund, Elliot Associates, has made an offer of $5.75 a share or roughly $2 billion, for the company.
The stock is trading slightly above that, up $1.23 to $5.98, as traders place bets that better offers might emerge from other networking-related concerns such as Microsoft (MSFT) and Cisco (CSCO) or maybe even IBM (IBM).
Novell’s stock, which was once a very hot commodity back in the nineties, have severely lagged the broader market in the past ten years, dropping 88.88% from the ten year high of $42.44 that was reached on January 4, 1999.
Hot Stocks Of The Day – 03/02/10
Mar 2, 2010 Mergers & Acquisition, Stocks On The Move Leave a comment
Green Mountain Coffee (GMCR) – $87.88 +$4.27 – Late yesterday, Peet’s Coffee & Tea (PEET) extended an offer to acquire Diedrich Coffee (DDRX), which Green Mountain Coffee is also looking to buy. To the extent that the stock of a company proposing to acquire another, usually drops when a merger/takeover is announced, traders are probably bidding up GMCR shares on the possibility that it may not be acquiring Diedrich Coffee. Green Mountain Coffee’s offer of $36 per share however, is still better that Peet’s $26 per share offer.
MSCI Inc., (MXB) – $32.61 +$4.02 – The shares rallied 14.06% after the company announced that it was acquiring RiskMetrics Group (RISK) for approximately $1.5 billion. MSCI Inc., provides investment decision support tools to investment institutions.
Terra Industries (TRA) -$45.67 +$4.47 – CF Industries (CF) announced an offer to acquire the fertilizer producer for $37.15 in cash and 0.0953 of a share of CF Industries common stock for each Terra Industries share, for a total of $47.40 per share or $4.74 billion. This trumps a $4.1 billion offer by Norwegian company Yara, that was made last month, which Terra agreed to.
This is a long running saga, with Terra Industries having rejected several offers from CF over the past year, apparently not wanting to sell out to a competitor. CF had withdrawn its last offer as it had come to the conclusion that Terra was absolutely not for sale. They made this recent offer, since Terra is now obviously amendable to a sale.
In its letter to Terra’s board, CF stated the following: As you are aware, we were advised that no information would be provided to us because “Terra is not for sale.” Following this response, we withdrew our offer, and we have not had any further communication with you. We do not understand how Terra could have entered into an agreement with Yara without giving CF Industries an opportunity to bid on a level playing field. We also do not understand how Terra could have accepted an offer from Yara with a risk adjusted present value that we believe was not higher than the offer CF Industries had made in December 2009.”
Trade Recommendation Follow-up – Nordson
Mar 2, 2010 Stock to watch, Trading Idea Leave a comment
On February 23rd, we recommended buying Nordson (NDSN) shares, as the stock was up almost 9%, on a day that the major indices were all down between .91% and 1.14%.
The stock closed today (03/02/10) at $67.09, up from our $64.75 entry. However, the stock is up against short-term resistance and we recommend taking profits here. If the market opens strong tomorrow, or the going is good early on and or Nordson shares are moving up, hold on until later in the day. Otherwise exit early on.
Google Could Be Heading Much Higher
Mar 2, 2010 Stock to watch, Stocks On The Move, Technical Analysis, Trading Idea Leave a comment
Google - 03/02/2010
On January 4th, the first trading day of this year, Google (GOOG) shares hit a 52 week high of $629.51. The shares then promptly turned around and lost about a hundred points over the next month.
It seems that that correction is now over. The shares maintained strong support at $520 during the decline, hitting that level twice, but never going below it, and consolidating just above that mark over the past month.
Today, with a $10 gain in the shares, which has moved the stock to the $542 level, Google is the largest point gainer among S&P 500 stocks.
If we see an extension of today’s gains and Google shares clear the $545 area the next few trading days, then we could see the stock move much higher to the $580 area, although, we could see resistance at about $560.
If we do see continued overall market strength in coming days, traders may want to look at adding Google to their trading portfolio.
For those doing so, this is not a long term trading idea, as the market may continue to get hit by adverse news, economic or otherwise.
Nuvasive Shares Jump 34%
Feb 26, 2010 Stock to watch, Stocks On The Move Comments Off
Nuvasive’s (NUVA) stock was an impressive mover on Friday February 26, climbing $10.31 to $40, for an incredible 34.73% move. The stock got a boost this morning after the company announced that insurer Aetna (AET) had changed its policy and will now cover the company’s XLIF spinal surgery procedure.
The shares are further climbing in after hours trading, as the company also announced after the bell, that United Healthcare (UNH) had changed its lumbar spinal fusion policy and will now also cover the XLIF (eXtreme Lateral Interbody Fusion) spinal surgery procedure.
Buy Big Lots Options On Upcoming Earnings
Feb 26, 2010 Earnings, Options, Trading Idea Comments Off
The following is the latest trade from our Options Capitalist service.
Closeout retailer Big Lots (BIG) reports its latest earnings news on Monday. There is a very good likelihood the company beats estimates, which should send the shares higher.
Buy the Big Lots March 2010 32.50 calls. They are now trading at $1.90 by $2.05. Enter to $2.40. There is a fifteen cents spread between bid and ask, which is larger than what we prefer, but with a beat, we should see a $2-$3 pop in the stock.
The Options Capitalist is a subscriptions-based options trading recommendation service. More information about the service can be found here.
Ugg Boots Maker Up 12%
Feb 26, 2010 Earnings, Stock to watch, Stocks Comments Off
Deckers Outdoor (DECK) is seeing its shares rally very strongly today, on great fourth quarter numbers. The company, whose brands include Ugg shoes, reported late yesterday, that for the most recent fourth quarter period, it earned $67.7 million, which translates into $5.22 per share, against the $4.28 per share that analysts were forecasting. This compares to earnings of $40.5 million or $3.07 per share in the fourth quarter period a year ago.
The stock at 12:56 pm, is up $13.19, to $119.35, a gain of 12.42%.
Option Trade of The Day – 02/26/2010
Feb 26, 2010 Uncategorized Comments Off
The following is the latest from our subscription-based Navivest Options Writer service. It is a very compelling trade that we are making freely available to readers of the Navivest blog.
Shares of InterMune (ITMN) are trading at $13.84, currently down $0.14 on the day. The stock in in a downtrend, after rallying from $13.46 on January 22nd, to a high of $17.81 on February 3rd.
The options on the stock are very richly priced and the March 20 calls are asking $2.00! Selling these, translates into a 14% potential in just three weeks on a covered basis. We will be selling uncovered calls, making it a 100% proposition if the stock does not get called away on us.
As a biotech company, there is the risk that the comany could announce some news that sends the shares soaring, but those risks, in the three week time frame we will be in the trade, are limited in our opinion.
THE TRADE:
Sell the InterMune (ITMN) March 20 calls.
TRADE FOLLOW-UP:
The First Solar calls are now bidding just $0.05, down about 95%, which is great for us, having sold those calls. Keep position open.
For information on Navivest Options Writer, click here.
Option Strategy of the Day – Covered Calls
Feb 24, 2010 Options Comments Off
Covered calls are call options that are sold by an investor/trader who already owns the underlying stock, hence the writing or selling of the calls, are covered. Keeping in mind that for each option contract sold, the option writer is obligated to sell 100 shares of the underlying stock if the stock is called away, to write a covered call, you have to own a hundred shares of a stock, for every option contract that you write or sell.
In simpler terms, if for example XYZ stock is trading at $50 and you own 500 shares, you could sell 5 of the $55 March 2010 calls, which for the sake of conversation, we’ll say are trading at $1.50. So for selling five contracts, you collect ($1.50*100)*5 or $750.
The options expire on the third Friday of the month or March 19 in this case. If by March 19, XYZ is trading under $55, the stock won’t get called away and your profit is the entire $750 premium that you collected.
If by March 19, XYZ has traded above $55, say $60, then the option buyer will exercise the options, enabling her to purchase a $60 stock for $55 plus the $750 premium. Factoring the premium, her total price for the stock is $56.50. So she can purchase the stock and instantly turn around and sell the shares for a $3.50 per share profit.
Covered calls, is a low risk trade for the option writer. The worst that can happen is the stock makes a major move to the upside, and you lose out on the potential profit. For example, XYZ could run up to $95 and you lose out on all that profit because you have to give up the stock at $60 per share. However, while you’ve lost out on some potential profits, there is no actual loss to your portfolio.
Another benefit of the covered call is that it provides some downside protection to a stock holding. If XYZ drops to $45, ordinarily, you would have lost $5 * 500 shares, or $2,500. However, because you sold the calls and received the $750 premium, you limited your losses to $1,750.
Why Put On a Covered Call Trade:
You already own XYZ stock that you don’t want to sell now, but you don’t think the stock will be moving to the upside in the near-term.
You want to gain some extra profits from your stock holdings.
You want to hold on to the stock, but are worried the stock could move to the downside.
In summation, covered calls are a low risk options trade that you could use to generate regular monthly income. With 80% of all options expiring worthless, this is a trade that puts the odds in your favor.
