Exiting the CSKI Trade:
This trade was posted back in September 2010 and involved going long very deep out of the money call options and shorting the underlying at the same time. The premise was that the options did not properly account for the binomial nature of the outcome, which was that CSKI was a scam or not. If it was not a scam, the trade would be extremely profitable. If it was, then hopefully it drops enough or more to pay for the option premium.
I shorted the stock at 6.52 and covered this week at $3.05. CSKI has not been able to answer any of the allegations with satisfactory responses, and thus has slowly drifted lower. When accounting for the option premium, this trade resulted in a profit of $1.67 per share.From a return prescriptive, this trade earnings 25.6% when using the base price as the denominator, and 31.8% when looking at total capital at risk (since we bought calls, the downside to our short was capped at (11.76 – 6.52 = 5.24) per share).
So overall, a quite profitable trade, although it would have been more so had the company been legitimate.