RunawayTrader

I put a Post-It note on DNDN’s message board today in response to a group of posters embroiled in a brouhaha because Ameritrade raised its margin requirements on this stock, which, in turn, resulted in a broad discussion of the whole notion of betting only so many dollars as you can afford to lose.

The fellow who started the crossfire bitched that he had been called by an Ameritrade rep who told him he should diversify his holdings because he owned largely a single stock: some 35k shares of DNDN along with 5k in calls options. The rep was told to piss off.

I don’t know the particulars of this fellow’s investment portfolio but wow!, that’s really a lopsided holding and (if this guy’s on margin) could really produce some pain if things go against him. And as we all know, that’s what the stock market is all about:  I try to take your money; you try to take mine; and the MMs try to take everybody’s.

Actually, I only wish an Ameritrade rep had called me when I was (stupidly) holding 8000 shares of SCT  few years ago. I was waiting for the “big buyout” and took a $30,000 hit overnight when it was made public it was never going to happen. I vowed then I would never bet big on binary trades again. And I haven’t.

I’m Not the Only Cage Rattler

By now you’ve read the downgrade from Citi analyst Dr. Lucy Lu that sent the stock down to a level where I could comfortably buy more. Claiming shares were “priced to perfection” (I don’t know what the hell that means), she pointed to at least one of the issues that I mentioned in a recent blog that could be a formidable hurdle preventing FDA approval this month: The question of manufacturing facilities. (Read my last blog on the subject for more on that issue).

Anyway, her downgrade sort of cemented my thinking on keeping a low profile on this stock. My thinking, if you’ll recall, was that if the FDA delays approval this month, the shares will tank at least 10 points as under-capitalized traders scramble for the exits.

Still, Dendreon’s drug, Provenge, would remain on track for eventual approval. In the short run, though, opportunity looms; a huge number of margin traders are going to get “the call” and will have to pony up extra bucks or sell their positions—at a loss. And a confession here. The only time an Ameritrade rep called me was after SCT imploded.

As far as I’m concerned, the time to buy more shares on the cheap will be after the approval is delayed. That’s when it becomes a surefire trade. And since I own less than a thousand shares of the stock, I can afford to (a) buy lots more; and (b) sit and wait it out for final approval. Time will be on my side. As a matter of fact, that would be a great time to back up the truck to the options desk and start buying options for later this year. But for now, color me chicken as in yellow, but I’ll hold my tiny cache of DNDN and wish all you daredevils the best of luck.

Meantime, I’m nearly done with that book that’s been hanging over my head all winter long and as soon as it heads for the printers, I’m outta here. First stop:  Rome. From there, who cares? Just runaway. Just go.