FTEK Puts Up About 59% - Suggest Locking in Profit
Posted: 08 March 2010 07:40 AM   [ Ignore ]  
Total Posts:  49
Joined  2008-05-06

March 8, 2010 – On February 2, we said that while we liked Fuel Tech (Nasdaq:FTEK) we thought the stock could see some further downside as a byproduct of broader market weakness and suggested we would be interested in owning the stock sub-$6. The stock subsequently dropped from the mid-$7 range to the mid-$5 range, and on February 11, suggested selling the September 7.5 puts on FTEK for $2.10. The position is up more than 30% this morning.

Today, those puts are up more than 59%. Our assessment is that if we leave the put positions alone, they will likely expire worthless in September, which would yield a 100% return. On the other hand, we expect the broader markets to remain volatile in the next several months, which could lead to a retracement in FTEK’s stock, and another opportunity to sell puts (see our similar strategy, which has worked out well on First Solar). In addition, in this market, a 59% gain in a little more than a month seems to be more than adequate.

Our advice would be to close at least half, if not all, of the put position, locking in that 59% gain.

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