March 8, 2010 – On February 2, we said that while we liked Fuel Tech (Nasdaq:FTEK) we thought the stock could see some further downside as a byproduct of broader market weakness and suggested we would be interested in owning the stock sub-$6. The stock subsequently dropped from the mid-$7 range to the mid-$5 range, and on February 11, suggested selling the September 7.5 puts on FTEK for $2.10. The position is up more than 30% this morning.

Today, those puts are up more than 59%. Our assessment is that if we leave the put positions alone, they will likely expire worthless in September, which would yield a 100% return. On the other hand, we expect the broader markets to remain volatile in the next several months, which could lead to a retracement in FTEK’s stock, and another opportunity to sell puts (see our similar strategy, which has worked out well on First Solar). In addition, in this market, a 59% gain in a little more than a month seems to be more than adequate.

Our advice would be to close at least half, if not all, of the put position, locking in that 59% gain.

Important Disclosure:

This information is intended to assist investors.  The information does not constitute investment advice or an offer to invest or to provide management services and is subject to correction, completion and amendment without notice.  Any such offer, if made, will only be made by means of a confidential prospectus or offering memorandum or management agreement.  It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future results or expectations.  As with all investments, there are associated risks and you could lose money investing.  Prior to making any investment, a prospective investor should consult with its own investment, accounting, legal and tax advisers to evaluate independently the risks, consequences and suitability of that investment