Taking Profits in Monster Worldwide (MNST)

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January 31, 2008 | SIN Picks | | Author Asif

On a day when the Dow is up 140 points or 1.1% as I write this, Monster Worldwide (MNST) is down over 6% ahead of its earnings release this evening. Reflecting economic conditions, Monster Worldwide’s January employment index declined 9 points to 160 from 169, representing the third straight monthly  decline leading to a downgrade of Monster Worldwide by Deutsche Bank analyst Jeetil Patel. Anticipating slowing job growth, we picked up $30 March 2008 put options on Monster Worldwide back in September as mentioned in the Hedging Your Bets section of the September 2007 investment newsletter.

These puts are now up almost 125% and I think it is prudent to close this position ahead of the earnings call today and because we are less than 2 months from options expiration. There have also been increased buyout rumors with former chairman and CEO Andrew McKelvey’s voting stake cut to 7.4% from 31% following an options backdating settlement. Hence I believe at this point the risk of holding on to these options far outweighs potential future gains and I will be closing this position both in the SINLetter model portfolio as well as my personal portfolio after this blog entry is published. The closing price of the day will be used as our selling price for the model portfolio.

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