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MCM April 2007 recommendation CEPH put side

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We are recommending a put spread on the following issue:

This will complete a combination on both the call and the put side of CEPH.

We are looking for CEPH to close between $75 and $65 and gain both of the premiums, however of CEPH should require us to close out either side we will reduce our exposure by the premiums collected on the both call and the put side, to offset a loss, if that should occur.

CEPH - Cephalon is an international biopharmaceutical company focused on the discovery, development and marketing of products to treat sleep disorders, neurological disorders, cancer and pain. In addition to an active research and development program, they market products in the United States and various countries in Europe.

CEPH $71.67

SELL CQE-PM CEPH APR $65.00 PUT CREDIT= $1.00
BUY CQE-PL CEPH APR $60.00 PUT DEBIT $0.40
NET CREDIT = $0.60
 

INITIAL "NET- CREDIT TARGET= $0.60 or $60.00
POTENTIAL PROFIT (x 10 CONTRACTS @ $0.60 = $600.00
MARGIN REQUIRE. (x 10 CONTRACTS $4,400.00
RETURN ON INVESTMENT= 13.64%
EXIT STRATEGY = 1. WATCH LIST 2. MAXIMUM LOSS SPREAD PRICE DIFFERENCE $5.00
1. STOCK WILL BE PLACED ON WATCH LIST IF STOCK PRICE DROPS TO: $67.50
2. EQUITY INDEXES
A STOP LIMIT will be placed on the SHORT STRIKE PRICE on any EQUITY OPTION that has a STRIKE PRICE DIFFERENCE OF $5.00 or MORE.
THE STOP LIMIT ON THIS POSITION IS NOTED BELOW:
CEPH POSITION STOP BELOW
CQE-PM STOP LIMIT EXIT >> = $2.50
If and when the STOP LIMIT IS EXECUTED - A contingency order should be in place to then SELL the LONG SIDE of the Spread and close the position with a Market Order if and when the SHORT side needs to be STOPPED OUT



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