Need explanation from a finance genius!


  • Mar 19, 2010 10:04 PM GMT
    Can someone explain this to me in plain English what the writer is trying to say and where the money is being made or lost? Thanks in advance

    Please note that I don't own any of this company's stock or even have any association with this company, except for my recent interview with them. That's all.

    "Dendreon ( DNDN - news - people ): The biotechnology company received a repeat performance of bearish options activity observed during the previous trading session. Thursday we reported a put butterfly spread in the April contract on Dendreon. Friday the same spread doubled in size. Shares of the biotech firm slipped 1.15% during the current session to trade at $35.75. As was the case Thursday, the spread involved the purchase of 5,000 puts at the April $30 strike for an average premium of $0.94 each [wing 1] and the purchase of another 5,000 puts at the lower April $20 strike for $0.38 apiece [wing 2]. The body of the butterfly centered at the April $25 strike where the bearish investor shed 10,000 puts for a premium of $0.46 apiece. The net cost of the spread is $0.40 per contract, which is a full 10 pennies more expensive than the butterfly spread initiated Thursday. Maximum potential profits of $4.60 per contract are available to the pessimistic player if Dendreon's shares plummet 30% from the current price to settle at $25 at expiration. Profits start to accumulate if shares breach the upper breakeven price of $29.60 ahead of expiration day in April."
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    Mar 19, 2010 11:48 PM GMT
    Hit up HndsmKansan (Chris)http://www.realjock.com/HndsmKansan. He always gives sage and sound financial advice.
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    Mar 20, 2010 1:43 AM GMT
    I'm not sure what you are asking? Are you asking someone to explain what a butterfly spread is, or how it works? Or, are you asking someone to clarify the numbers?

    http://www.theoptionsguide.com/long-put-butterfly.aspx

    [url]http://en.wikipedia.org/wiki/Butterfly_(options)[/url]

  • Mar 20, 2010 3:14 AM GMT
    NakedDevil saidI'm not sure what you are asking? Are you asking someone to explain what a butterfly spread is, or how it works? Or, are you asking someone to clarify the numbers?

    http://www.theoptionsguide.com/long-put-butterfly.aspx

    [url]http://en.wikipedia.org/wiki/Butterfly_(options)[/url]


    I know what spread and butterfly mean in terms of options. I want to understand the write. What is he saying that some investor are doing to this specific stock. What are the various figures mean?