Macro Tsimmis

intelligently hedged investment

Dendreon (DNDN) update #5

Posted by intelledgement on Fri, 30 Mar 07

As planned, we sold off all our DNDN options today. If you anticpated our advice—which in retrospect, we should have posted last night or early this morning before the market opened; sorry!—and unloaded the options first thing this morning, with DNDN stock opening at $17.92 (up $13.30 from Wednesday’s close!) and then trading as high as $18.55, you could have gotten $13 or more for your UKODA Apr $5 call options.

Per our portfolio rules—having posted the sell rec after the market opened—we had to be content with the closing prices and—as DNDN’s stock price declined all day following the brief scouting expedition north of $18 after the open—we ended up with $9 for our nine UKODA calls and five cents for our five UKOKA Apr $5 puts (and thanks and good luck to the buyer of those; failing something on the order of a meteorite wiping out Dendreon’s HQ in Seattle in the next two weeks, the puts are virtually certain to expire worthless).

So in summary, counting two $15 commissions (normally we figure $8 but options trades are generally more costly than stock trades) acquiring the two positions 9 March cost us $1,975 ($1.05 for UKODA and $2.00 for UKOPA) and selling them 30 March netted us $8,095, which works out to a 310% profit…not a bad 21 days’ work! (And we are up another $1,200 on our DNDN position…with, hopefully, more to come after 15 May.)

Sorry these sentences are so long; we’re a little giddy here.

OK, shorter sentences now. We feel constrained once again to point out that situations such as this occur rarely. And when they work out so well, it’s at least partly luck. To wit, it so happens that one of the key Dendreon witnesses missed the advisory committee meeting due to transportation issues. Obviously, it was not a problem; they did fine without him…but consider this: someone noticed that the efficacy question wording was not congruent with FDA standards and—after the roll call vote had reached 0-3 against Provenge—pointed this out to the committee chairman. A discussion ensued, at the end of which the question was reconfigured to be less requiring (instead of “is Provenge efficacious?” the question became “is there substantial evidence of efficaciousness?”). All three naysayers switcher their votes and the question was answered in favor of Provenge, 13-4.

Now think about what might have happened had the individual who noticed the wording problem missed his plane (or whatever).

As the man said, “Luck is the residue of design.” But let’s not forget there’s still luck involved in speculation. We’re good, but yesterday, we got lucky, too.


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