I'm now holding 70K shares and am thinking about writing covered calls for the Nov13 $9 strike. I'm going to be holding the shares anyway through Nov and if the price hits 9, I'll be quite happy with the profit (I would make nearly 400K on all 70K shares if the price hits 9).
I'm new to options, so I'm wondering how likely it is that I would find buyers if I attempted to sell those calls on 50K shares? The current price is .26 so I would wait for the price to bleed back up to 6 before doing this.
Writing covered calls is Foolish and there is not enough profit in it. Ask the people who were writing June/July calls in May when the stock was at 4 dollars how they did. This company has Vol near 100% for a reason. Unless you are on an institutional desk and likely to get wind if Mannkind is getting serious with one of your firms BP clients, shorting this is not real smart. 1st, an announcement that takes the stock back up quickly, could happen at any time. 2nd, there is nothing that will keep this stock from running up into FD approval, so you have no real risk until April 2014. 3rd, the Mann group loan is essentially paid back now and he could loan 300-400 million to the company at any time, allowing the company to commercialize domestically alone, save them billions in gross margins...this puts pressure on BP and they know a TV, internet, gorilla marketing will create a demand pull for the product as clients come in and say I want to try Afrezza ( This is also why the Type II trial results were so important ). 4th, Notice BofA's analysis came out the morning after the stock blasted through the 20 DMA with a 50 DMA at 6.84 with the next level at 7.50. 6.80 is a critial level for Merrill Lynch tied to their bond underwriting. It shows how worried they are of a spike upwards, why else would they destroy their ability to do business with the company in the future. They know at some point this company will get bought out. Good Luck
I can't see any news moving it to $9 except FDA approval. I seriously doubt a partnership/alliance w any BP could be on such favorable terms to MNKD to move the share price in any appreciable way.....
if you'll be happy w the profit if it hits $9 then do it. I doubt it will get to 9 by Nov, so you're most likely to just pocket the premiums. the premiums are actually quite juicy on MNKD....I've written Jan $7s, $8s, and $9s on ~ 50% of my shares. like you, I have a low cost basis ($2.87) so I won't mind losing the shares.
mauouo: depends on how wealthy you are I guess. I'm trying to retire next year so every little bit helps. I made some bad investments elsewhere (VELT, PZG, SPPI) that I need to cover. I did well in TSRX and made a bit trading BIOD and ATRS. Working on MACK, APPY, ATRS ( ATRS is a good multi-year play w/phase III trials lined up back to back for four years - may trade out after approval which looks like a slam dunk, but mostly priced in).
I would be able to collect approximately 15K in premiums if I sold calls on all 70K shares... assuming there are buyers out there. I think that's the main problem... finding the buyers at my price.
If MNKD announces a great partnership, I have enough cash to buy replacement shares for all the shares that would be called away at 9 if it looks like this thing is heading to 15.