The LEAPS Trader
105 W. Monument Street
Baltimore, MD 21201
Monday, November 12, 2007
Email – #397
** The last time these guys bought shares, the price tripled within a year
The company is Viropharma (Nasdaq: VPHM), one of the most volatile shares in the biotech world. The difference with this biotech is that it is a biopharmaceutical that actually makes money and is selling drugs into the marketplace today.
The shares are currently trading just off their 52-week low and close to the company’s book value and cash value.
This has not gone unnoticed by insiders or a major biotech fund. Both have been buying shares at current levels. The last time there was this much activity behind the scenes, the shares more than tripled in price within a short period of time.
VPHM develops and commercializes products that address serious infectious diseases, mainly in hospitals, not with individual physicians.
The company is currently testing several drugs, including a promising late stage anti-viral drug used in liver transplants. This drug is in stage 3 trials, which is make-or-break time for drugs seeking approval. Maybe there is some good news around the corner that the public is not privy to – that is also the risk in this play. Its main moneymaker is a drug called Vanocin, an antibiotic. It contributed over $50 million n revenues last quarter and more than 25 cents per share in earnings.
We will take the LEAP approach, investing a little bit just in case the company’s latest drug pulls through. If we are right, we could see 4 to 1 gains in short order – if we are wrong, our dollars at risk will be minimal.
Here’s what you should d
Buy the Viropharma (Nasdaq: VPHM) January 2009 $12.50 call LEAP (ZCG-AV). It is currently trading at $1.45 on the offer. Do not pay more than $1.45 for this option, and expect it to be extremely volatile on both sides, up and down. This is a very speculative play that is backed up by unprecedented levels of institutional buying.
Good trading,
Karim
Bi
Karim Rahemtulla is one of the country’s foremost specialists in options trading, and, a principal founder of Mt. Vernon Research , as well as the founder and editor of The Income Trader: A Covered Call Strategy and The Smart Profits Report . Over the past three years, his options strategies have cashed in winners more than 70% of the time. Karim is also an editor of Mt. Vernon Research’s Xcelerated Profits Report , a monthly newsletter devoted to making money using the safest stock and option strategies to reap great returns. An internationally renowned options trader who’s been dubbed a “Market Maven” by CNBC, Karim also sits on the Advisory Panel for The Oxford Club , and is a frequent contributor to The Oxford Club Communiqué . Karim was educated in England, Canada, and the U.S. and is fluent in several languages. He travels the world regularly to find the best investment opportunities for our members.
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