Some Trading Results

DNA

Yesterday  I discussed the Genentech (DNA) Roche Holdings merger and that I sold puts on DNA.  Every day Genentech has had a leg up so that the puts I sold have gotten cheaper.  So yesterday, the puts were bought in for a quarter.  There is no premium left in the March options, so there is nothing more to do there.  If you sold the April 95 calls and the April 90 puts you could earn $0.85 in premium for the pair.  That might make sense since Roche Holdings will succeed in buying DNA for $95.  If instead you sell the April 95 straddle, both the put and call at a strike price of 95, you would earn $1.25.  In that case, if it closed below 93.75 on April 18th, you would have a loss.  Since targets usually trade at a discount to the purchase price to allow for unforeseen problems with the purchase, the first trade seems a better bet.  The danger in selling the calls is that there appear a new suitor to DNA and they try to bust their acceptance of Roche Holdings’ offer at $95.  This would be a difficult thing to do because Roche already owns 56% of the company.

So I just sold the 90 puts.

NLY and HTS

In a previous post I wrote about selling puts on NLY and HTS and then selling stock to stop the losses.  Today I bought in the puts since they were cheap and I have an order in to buy the stock back at a lower level than where they are trading now.  If I am not filled, I will turn it into a market on close order.

The final reckoning:  I sold the 10 NLY puts at 0.7 for a credit of $700 on 23 Feb.  I sold 500 shares of stock at 12.40 on 6th March.  Today I bought in the puts for 0.3 and the the stock market on close at $14.37  so I made $400 on the puts and lost $985 on the stock.  Net -$585.

On Hatteras Financial I sold 10 puts at $0.8 each for a credit of $800.  I sold 300 shares of stock on the 6th of March for 21.57.  I bought in the stock today, market on close for $24.36 and I bought in 5 of the puts today at $0.1 and five of them Wednesday for $0.35.   I paid $50 for the puts today and $175 for the puts on Wednesday.  So on the puts I made $575; on the stock I lost $837 for a net loss of $262.

Better than I thought.  Selling the stock helped lessen the losses.