Shorting the news again

I am back to paying full attention to this portfolio after a hiatus of a few weeks. I have been >80% in cash recently which has meant that I missed a lot of the recent gains. However, if I don;t have capacity to pay full attention I prefer to be out of the market.

Today I took a position in VVUS puts. On Friday news was announced of the approval of VVUS’ ED drug, Avanafil/Stendra. In the past I have written of my research into shorting news of approvals and so this morning I entered a put position at the open. Given that so much of the focus on VVUS has been and will be on Qnexa, I don’t expect a huge return from this trade. However it also seems like a reaonably safe trade as the approval is unlikely to cause any significant gains and the news may drive some holders to liquidate early.

I committed 4% of NAV to purchasing puts and got in at an average price of $130 per contract. I probably will not hold beyond tomorrow.



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