by Michael Shulman | October 30, 2013 2:12 pm
I have followed Questcor Pharmaceuticals (QCOR) since it was fifty cents a share. I am still working because I sold my shares at five bucks. It is now $58 and change, down 15% today, because the company announced it was yet again being investigated by various government agencies for marketing practices. It’s a great opportunity for those you looking to speculate and perhaps an even better one for those of you wanting to generate some quick cash by selling some puts. I have sold puts for more than two years in my service Options Income Blueprint and I have yet to see a better short term opportunity.
Here is what happened.
The company announced that the Feds and others are investigating their marketing practices. This a tempest in a teacup because the company gets most of its revenues and huge profits from the sale of Acthar gel to treat violent infantile spasms than can maim or kill. My cockapoo Sumo understands this is the standard of care for these kinds of spasms and when you charge more than $25,000 a vial there is a lot of money to be made. I can only guess but I am assuming the government questions into marketing are either about the gel’s approved use for multiple sclerosis spasms or other indications not “on label” but being (possibly) being discussed by sales people. But even the company discussed these other treatments in earnings releases and other announcements, so I am not sure what the government’s beef is with the company.
Admittedly, this is speculation on my part — but so is hammering the stock of a very profitable company by 15% based on a vague three-paragraph press release. The reality is the company announced earnings less than a week ago that saw revenue jump 45%. Sounds good to me.
Rather than speculate, I am the conservative type and now is the time to sell some puts with outrageous premiums.
The stock is trading at $58.50 or more. If you sell this week’s $57.50 put, you can clear almost a buck, that is a 0.9% return in two days or so. If you sell the November $57.50 put that expires on November 16, you can get a return of 2.7% in less than three weeks.
Sounds like the Street has it wrong, yet again — sell those puts, take their cash, and do not speculate. Instead, generate — income that is.
As of this writing, Michael Shulman did not hold a position in any of the aforementioned securities.
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