INAP (Internap Network Services)

I came across this name while looking through arbitrage deals for Piedmont. The company is buying VSTH in a stock deal. The acquisition should help the company cross sell new services to existing clients at a point where the company is ramping up sales and becoming a profitable entity. The overall margins should benefit significantly from revenue growth as the infrustructure has been costly to put in place but there is little marginal costs associated with new clients.

I got involved in the stock as it traded out of a base that began in April. The breakout was in strong volume and really was a trade through a consolidation started after the stock broke out a couple of weeks earlier on lighter volume. Since then I have traded around my position a bit and added size to it at opportune times. I currently have a realized loss of nearly $30,000 which is due to selling calls against the position and then buyng in the stock at higher levels to keep the exposure on. My unrealized gain is north of $65,000 and this has happened in just a few months so I feel the buy has been one of my better trades and I expect the momentum to carry it further. I have a 4% position and 1/3 of that is hedged with calls that have recently flipped from being out of the money to now being in the money. Expiration is next week so it will be interesting to see whether the calls are assigned and then i will have to decide whether to ramp back up my exposure or leave it at a lower level.

Jan 19, 2007

Yesterday was a very difficult day for small caps in general. The Russell 2,000 dropped 1.25% and the IBD 100 dropped 2.4%. My account took quite a hit and a large part of it was due to INAP's drop. I looked all over and couldn't find any significant reason why the stock would be dropping except maybe people unwinding their merger positions. At any rate, the calls were not assigned and while i didn't get stopped out at the full 10% loss, I decided to use today's rebound to lighten up on my position until the picture is clearer. I sold 5,000 shares leaving me with 10,000 shares now un-hedged. The rebound today was in strong volume which is encouraging but I'm still a bit concerned.

Jan 26, 2007

Since the sharp selloff the stock has stabalized but not rebounded as i would have hoped. Normally I would give the stock more time to shape up, but there have been some warning signs in the overall market so on Wednesday I sold the last portion of my stock at 17.85 (before the stock made a late day run @#%@#$) In total the trade was only a slight success as i made a few thousand on a full position.