EXPRESS SCRIPTS®

I was right after all, about Express Scripts being overpriced at $76 last November (2005). Sure, the stock went to $95 after I bought the $75 February 'put' for $524 (including commission) and expired worthless. But shortly after the put's expiry date, the stock exited the $90 level. By the end of April it had passed through $80 and in early June it dropped below $70.

Being half-right with options isn't worth anything. I was right about Scripts being over-priced but wrong about when the market was going to recognize and react to it.

But it has now occurred to me that I would have been better off shorting the stock rather than buying a put. Being short the stock would not have terminated (like the put did on February 17th) the $524 investment in my judgment that the stock was overpriced.

However, to have shorted 100 shares of Scripts in November, I would have had to borrow them from a broker and sell to receive US$7,600 (less commission). Next, I would have had to sweat through the stock going to $95. If I lost confidence in my judgment and covered the short position then, my loss would have been about $2,000 plus commissions and the broker's interest charges on the borrowed shares.

However, had I remained confident in my view that Scripts was overpriced, I would now enjoy the opportunity to replace the borrowed shares for about US$7,000 to earn a gain of about $500. But, you know, $500 doesn't seem like enough to enjoy after being exposed to the $2,000 loss and the emotional turbulence of repeatedly challenging my judgment. Jeremy