The Money Tree

Safely Generating Income in Retirement

Archive for March, 2010

New Trade – MYGN

Posted by mounddweller on March 29, 2010

All,

I executed my trade in Myriad Genetics this morning.  The stock was bouncing all over the place at the open as was the option pricing.  One thing I didn’t note in my original write-up is that the options for MYGN are fairly thinly traded.  Thus, the bid/ask spreads are very wide.

Here’s the trade I entered:  I did a buy write on 300 shares (as opposed to the 400 I referenced in my last post) for a net debit of $24.25/share. 

The trade executed as follows:  Bought 300 shares MYGN at $24.68.  Sold 3 APR $25 calls at $0.55.

This makes my ROIC 2.22% if unassigned (0.55/24.68) and  3.53% if assigned ((25 – (24.68-0.55))/24.68).  Those aren’t bad numbers given there are only 19 left to APR expiration.

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Posted in Troy's New Picks! | Tagged: , | 4 Comments »

Potential New Trade – MYGN

Posted by mounddweller on March 28, 2010

All,

I have a new trade I expect to enter at the market open on Monday morning.  The name of the company is Myriad Genetics (MYGN).  First, the details on the trade I intend to enter:

Buy 400 shares MYGN at around $25.

Sell 4 APR $25 calls at $0.75 or better.

If I’m able to execute the trade at the prices referenced above my ROIC will be 3% for a 21 holding period.  That’s not bad considering the VIX is down around 17-18.

Now, why do I like this trade?  Well, I have a number of reasons, all of which revolve around SAFETY.  I remain convinced we have significant potential for a near term pullback in the overall market so I only want to enter new positions that I would feel comfortable holding should the market move against me.

First, let’s look at who they are and what they do.  Here’s what the profile on Yahoo has to say about them: “Myriad Genetics, Inc., a healthcare company, focuses on the development and marketing of novel molecular diagnostic products. It commercializes predictive medicine, personalized medicine, and prognostic medicine products. The company markets BRACAnalys for assessing a woman’s risk for breast and ovarian cancer; COLARIS molecular for assessing a person’s risk of developing colorectal cancer or uterine cancer; COLARIS AP, a molecular diagnostic product for colon cancer that detects mutations in the APC and MYH genes; and MELARIS, which assesses a persons risk of developing melanoma. It also offers OnDose, a personalized medicine product to measure a patient’s exposure to 5-FU chemotherapy; PREZEON that assesses loss of PTEN function in cancer patients; and TheraGuide 5-FU assesses a person’s risk of developing a toxic reaction to 5-FU-based chemotherapy. The company was founded in 1991 and is headquartered in Salt Lake City, Utah.”

OK, so I can ‘hear’ some of you thinking, “Troy, a genetics company, safe?”  Well, in a word, YES!  They develop and sell consumable medical diagnostic kits.  CONSUMABLE = repeat business; MEDICAL = steady demand regardless of economic conditions.  To me, that sounds pretty safe.

Now let’s look at the fundamentals.  Here are the financial highlights I found in Yahoo.

   As you can see they have excellent fundamentals.  They have a net profit margin of 32.74%.  Amazing!  For every dollar in sales almost 33 cents falls to the bottom line!

Are they growing?  Yes, quarterly revenue growth is over 10% and earning growth is north of 60%!

OK, what about the balance sheet?  How about this, they have a year’s worth of revenue sitting in cash and ZERO debt.   With a market cap. of around $2.4B and $350M cash in the bank, almost 15% of their market cap is cash in the bank.  To me, that’s pretty SAFE!

Now let’s move on and see what the technical situation looks like.  Below is the chart from VISIONS.  What do we see?  I see an almost perfect set-up for a successful trade.  The stock is coming off of a 52-week low set back in February.  It has been trading in the V for 23 days.  The only downside is that it hasn’t had 3 consectutive up days.  Thus, it’s  Gold$ score is only 80 instead of 100.

Finally, let’s look at what the VISIONS Stock Explorer has to say about the trade.  First, we see the stock is rated ‘TA’ (i.e., “Take Action”).  I’ve already mentioned the Gold$ score is 80.  The option month and strike price I chose only rates one ‘*’ in Ron’s Best Fit criteria.  It so happens he likes the MAY $25 call better.  It has 3 stars (‘***’).

Well, there you have it.  All in all I think this is a very good trade.  One of the best I’ve seen in several weeks.  One final thought, I did check for the next earnings release.  It is not until May 5, well after APR expiration. 

I’ll be back tomorrow with another post to let you know my exact entry point after I execute my trade.

Regards,

Troy

Posted in Potential Trades | Tagged: , | 2 Comments »

March Expiration

Posted by mounddweller on March 23, 2010

All,

Sorry for the delay in posting a message. This past Saturday my PC crashed and I’m slowly trying to recover lost data. Every day something else I need comes up missing.

Enough about that, please recall I only had two open position in March. My WFR position was called away. I originally set-up this trade in December and over the past 3 months sold a series of calls and naked puts. My total return for the 3 month period was a little over 14%. Not bad.

My other open position is in GME. You’ll recall I sold APR $21 calls on it back in February after it had taken quite a tumble falling from around $22 down to around $18. It it now back up above $22. If the market holds I will be called away at APR expiration.

Best of luck to everyone this month. I hope to be back in a few days with some new trades.

Regards,
Troy

Posted in Portfolio Updates, Uncategorized | Tagged: , , , | Leave a Comment »

What Others are Trading – March 2010

Posted by mounddweller on March 3, 2010

All,

Here’s a new message string where y’all can post your trading activity.  Thanks Rich for making the most of this opportunity.  Would love to see others getting involved.  If nothing else, comment on Rich’s trades!

Troy

 

 

Posted in Your Picks | 22 Comments »