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Genentech - DNA - close: 72.37 change: -0.47 stop: n/a

Company Description:
Founded more than 30 years ago, Genentech is a leading biotechnology company that discovers, develops, manufactures and commercializes biotherapeutics for significant unmet medical needs. (source: company press release or website)

Why We Like It:
DNA has a big FDA decision coming up on its Avastin drug. Actually it's a decision by an FDA advisory committee and not final approval but it can still have a big impact on the stock price of DNA. Avastin is already approved for other cancers and has shown to retard the growth of tumors. The upcoming decision expected on February 22nd or February 25th is about using Avastin to combat breast cancer. We are suggesting a strangle to capture any post decision move. Looking at the open interest there appears to be a lot of investors considering a strangle.

Suggested Options:
A strangle involves buying both an out of the money call and an out of the money put. We are suggesting the March options. Our estimated cost for this play is $2.80. We want to sell if either option hits $5.00 or higher.

BUY CALL MAR 75.00 DWN-CO open interest=14557 current ask $1.40
-and-
BUY PUT MAR 70.00 DWN-ON open interest=11306 current ask $1.40

Picked on February 20 at $ 72.37
Change since picked: 0.00
Earnings Date 04/10/08 (unconfirmed)
Average Daily Volume = 3.5 million
 

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