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No Chance for NCRX...

Stocks moved higher during Monday's morning session and one of our new candidates; NeighborCare (NASDAQ:NCRX), participated in the bullish activity. Unfortunately, the premiums in the put options faded with the upward bias and there was no chance to enter the recommended position at (or near) the target price. With that fact in mind, we have briefly reviewed the Supplemental Positions for a possible replacement and only two; Network Appliance (NASDAQ:NTAP) and Progenics Pharmaceuticals (NASDAQ:PGNX), appear viable based on the current option prices. Among those positions, NTAP, which provides enterprise network storage and data management solutions, is our favorite. However, the company's quarterly earnings report is due on Tuesday after the close of trading. Analysts surveyed by Thomson First Call expect earnings per share of 17 cents on revenue of $447 million, compared with EPS of 12 cents and revenue of $337 million a year ago. Currently, the (NTAP) JUN-$25 put options are trading near $0.35 and a credit in that amount for a 5-contract position would yield a potential gain of $175 against a required collateral balance of $3,665. The cost basis in the stock would be $24.65 and the expected return on investment (for 27 days) is 5.4%. Keep in mind, this is an earnings-related position, thus it is more speculative than most candidates in the portfolio.

Traders who are more risk-averse might consider a position in PGNX, which is a biopharmaceutical firm focused on the development and commercialization of therapeutic products to treat the unmet medical needs of patients with debilitating conditions and life-threatening diseases. The (PGNX) JUN-$17.50 put options are trading near $0.30 and a credit in that amount for a 5-contract position would yield a potential gain of $150 against a required collateral balance of $3,040. The cost basis in the stock would be $17.20 and the expected return on investment (for 27 days) is 5.6%. Although the company has already reported quarterly earnings, PGNX is involved in biotechnology and drug development, which generally tends to produce more volatile stocks than the average industry group.

OW Staff

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