Thanks!

Congratulations! I'm so glad to be apart of TalkMarkets. A big thank you to Boaz and Ilene for encouraging me to contribute articles.

Will do on both articles sometime soon then! I would say that the state of domestic and foreign affairs is quite alarming, coupled with the fact that the stock market tracking formula that I use is showing some warning signals at the 10-day trading avg. The market has climbed to unprecedented levels, so I believe it's only a matter of time that we see a sell off triggered by something.

Okay, so going back through my strategy, I believe one would only have to have 100 shares, considering that it requires selling a covered call at the $15 strike price, buying a $7 put and selling a put at $4, which successfully protects one from $7-4. Please let me know if this sounds accurate to you.

As I gradually build those positions, I will proceed to sell covered calls to enhance my yield. In response to your commentary on your virtual put portfolio below, I would say that I'm a lot more concerned about the market crashing sometime soon. The trading formula that I use (which deal with standard deviations etc. and a whole bunch of other statistics) leads me to believe that we could see a massive overall market decline, creating great buying opportunities.

I'm full of surprises! Do you think I should compose another article using this commentary? Just want to reemphasize that none of the options I use deal with naked contracts. I would tend to agree with Michael on the put topic because I'm by nature a rather conservative investor, and getting into dicey situations is not really something I like to do. Right now, for example, I am building a position in ETFs like VUG, VIG and VTI. I'm also accumulating VNQ -- a REIT.

Hi Ilene,

Thanks for the message back. I actually misstated my options strategy for MNKD. The full analysis is available here: http://seekingalpha.com/article/2261363-is-a-giant-leap-for-mannkind-possible

Strategies A and B require the investor to already own MNKD shares. The strategy that I favored was A, which entailed buying the $15 call, selling the $4 put and buying the $7 put. One of my followers on SA stated that he would have made around $15,000 had he employed this hedge.

Hi Ilene,

Thanks for your feedback. You present some very challenging questions. I strongly believe that options should be employed wherever feasible. The primary reason is that it's very difficult to measure one's odds of being right on the general direction of a stock, especially in the case of biotech. I want to be clear, however, that I'm not advocating selling or purchasing calls and puts without already owning the required shares for the transaction for obvious reasons. Indeed, you make a great point: why should an investor enter a position in MNKD if there is such an enormous amount of risk? This is where I agree with your assessment in that the safest alternative is to remain on the sidelines until there's (hopefully) a more opportune point of entry. Perhaps the reason some enter in spite of extreme risk is because they aren't aware of this risk, or simply because they are attempting to hit the jackpot regardless of how slim their chances are. Where I'll disagree with Michael the Banker is his recommendation that less sophisticated investors should avoid hedging presumably because it's somewhat convoluted and could potentially cause more harm than good in the event that the hedge is poorly structured. My rationale is that while there is a good possibility that a less sophisticated investor poorly structures a hedge, I believe there is a greater possibility that employing the standard buy-and-hold strategy will cause that less sophisticated investor to be far worse off. Take, for instance, the drop in MNKD shares following the approval for Afrezza. While I advocated for a hedge in the months leading up to approval (which expired on August 14, 2014), those who simply bought and hold through the regulatory decision date in mid July thinking MNKD would "skyrocket" following approval ended up losing 50% of their initial investment (assuming they held until Friday's close). What this demonstrates is a clear miscalculation of risk by many less sophisticated investors, underscoring the difficulty in accomplishing comprehensive risk assessment. Conversely, those who followed a hedge strategy similar to the one I proposed prior to the approval for Afrezza would have made an absolute killing (selling $15 calls and $3 puts, and buying the $7 put) without the same downside exposure as the standard buy/hold strategy, which is inherently unlimited. Moreover, the reason employing a hedge is optimal in the case of biotechs is because of the enormous swings that can make a hedge very lucrative. In my opinion, a hedge doesn't necessarily need to be elaborate in order for it to be effective, nor does it necessarily have to be precise. All a hedge must do in most cases is loosely fall outside/within the stock's parameters. And lastly, you make another good point: a fundamental problem that I've encountered with my dealings with long biotech investors is a tendency to dismiss the "other side" largely because they are emotionally attached to a company or their own position. This is a very dangerous tendency but it unfortunately pervades the world of biotech. Thanks again for your comments!

Thanks for your reply. At least three insiders have purchased shares on the open market. I would contest that this does indicate strong support from management. Once BioLife discloses the terms of its new contract manufacturing agreement, I believe we could see the stock recuperate.

Hi Moon,

Thanks for your input. The regenerative medicine sector has taken a beating since April, contrary to the general market. Also, what makes you say that insiders aren't as positive as me? Insiders have purchased shares going back to April, with no sales on record. A beneficiary owner also just bought roughly 144,000 shares in July. Clearly you can see why I'm confused by your statement. Thanks.