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Author: JiminyBillyBob Three stars, 500 posts Old School Fool SC1 Red Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 100  
Subject: Re: Options Date: 1/9/2013 11:20 PM
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While I have no idea what the stock price of QCOR will be in one month or one year from now, I think QCOR is a very good candidate for writing (not buying) options.

I'm bullish on QCOR, but realistically, I expect QCOR's stock price to stay within a range for the short term. This is because QCOR has become a battleground stock. Despite management's decisions and its obvious drive towards profits, this stock is heavily shorted, and we can expect several more neutral and/or slightly more restrictive revisements to insurers' policies regarding Acthar. These policies should not have a material effect on Questcor's revenue, but everytime such a revisement gets flashed in the news, it sends QCOR's stock down and re-instills doubt. Talks of a generic Acthar do the same.

However, while I expect QCOR's stock to drop several more times, I do not expect QCOR's stock to drop like a rock and stay there because despite anything the shorts are saying, Questcor's revenue and EPS are growing exponentially, the company has no debt, and, well, the stock has already been hammered. In addition, while a generic Acthar could be developed, there is no indication that any company has started, and I would be surprised to see it happen since it would not be cost feasible. Who wants to spend all that money on a generic so that it can compete with Questcor's Acthar in such a small pond and would be susceptible to other drugs being developed as treatments to MS, Nephrotic Syndrome, etc.?

Caveat: If the government investigation shows Questcor is culpable for something, this could cause the stock to plummet.

So I think QCOR is a good stock to write covered strangles on, and I've been doing this. It's good to own the stock for the dividend, and the premiums for writing QCOR puts and calls are extremely high. I also bought a small amount of QCOR deep ITM calls in case the stock takes off due to talks of a buyout or such, but I'm not counting on it.

Carl
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