Long-term, low-risk benefits with options

A new way to trade VVUS using Options

By Wall Street Media on MSN Money Jan 15, 2010 5:01PM

Written by Douglas Estadt


Make money over time, and make use of the markets properly. These are the words of my friend Ash Rust, a wise-beyond-his-years options trader I met on StockTwits.com last year. Because we learn from each other on StockTwits, we often circle back to trade the same stock, with whatever technique we use to trade.

 

That has happened with Vivus Inc (VVUS). VVUS is a stock we both like. VVUS is a biotech with a proven weight-loss drug right on the horizon and a very promising drug for E.D. in Phase 2 trials. Here are the key reasons today Ash shorted Jan. 2011 put verticals from 10 & 7.5:

 

  • If stock goes above 10 before Jan 2011, he makes 144%.

  • Because he shorted from a position below 10, this is an income trade. This stock is volatile, and his position will add money over time.

  • When you short options that are volatile, you risk less than you have maximum gain.

 

Watch the video below to learn about Ash's thesis.


To see where I have my investment dollars now, or to follow my picks, click here.



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