Earnings: IC vs Short Strangle

[atticus]

Quote from newwurldmn:

True.

I was referring to the width of the short strikes as most of the time people mention iron condors they are talking about selling wide strangles and buying wider strangles.

Shouldn't have quoted you. Really for the thread-starter.

 

[babutime]

The only reason I use an Iron condor (apart from protection) is because of the lower margins because now you're essentially selling two verticals.

 

[dbh21]

Quote from nazzdack:

Look at ticker symbol DNDN as a "reference" for what these types of stocks are capable of doing. :eek:

Snap - thats a shitty day. But I do understand that the vol is quite high - and anything w.r.t. to this stock would be speculative.

 

[dbh21]

Quote from newwurldmn:

Short straddle and short Iron Condor are expressing two different views (though the views are similar in that they both are betting on muted volatility). What matters is the strikes you are short. If you are short wide strikes in iron condors you will have a different risk profile than if you are short narrow strikes.

What different views? Aren't both an expression of decreasing vol within a given range - one just has more/some protection than the other?

Specifically regarding VVUS, earnings are irrelevant. The company doesn't even have a product yet. There is an FDA Advisory Panel soon and then an FDA decision on whether Qnexa (a diet pill for morbidly obese people) can be marketed. It's controversal for a lot fo reasons, I can explain over PM but bottom line is stay away if you don't have insight in this. VVUS could be a 5 or 25 stock... I made up the upper level.

I definitely have no insight - have read all the news, and don't have an informed opinion. My wife works with the FDA and says they are very very conservative under the current administration.

I was actually thinking a small covered call might work with this stock. The premium is high, and if it drops, the FDA meeting is not final, so there is a good chance for the further trials to work out well in the future. Definately would not be a large position...

Thanks

 

[newwurldmn]

Quote from dbh21:

What different views? Aren't both an expression of decreasing vol within a given range - one just has more/some protection than the other?



I definitely have no insight - have read all the news, and don't have an informed opinion. My wife works with the FDA and says they are very very conservative under the current administration.

I was actually thinking a small covered call might work with this stock. The premium is high, and if it drops, the FDA meeting is not final, so there is a good chance for the further trials to work out well in the future. Definately would not be a large position...

Thanks

Depends on how wide the short part of your iron condor is.

I had also read that there is talk that the FDA will issue another complete response letter. But it's a real wild card. They had gone before and the FDA wanted a bigger trial. Now the FDA might want something else. Weight loss is tough because it's not that important (compared to cancers where there is no treatment option).

Many weight loss and diabetes drugs have gone up to the FDA and almost all of them have been rejected over the last few years.

 

[newwurldmn]

Quote from nazzdack:

Look at ticker symbol DNDN as a "reference" for what these types of stocks are capable of doing. :eek:

ITMN.

A lot of hedgefunds lost hundreds of millions each.

 

[atticus]

Quote from newwurldmn:

ITMN.

A lot of hedgefunds lost hundreds of millions each.

I know of one that was majority OI in the options and lost something approaching 100MM in the options alone. I think he eventually got out of the shares profitably.

 

[spindr0]

ITMN? Nice double top formation !!!

 

[sle]

Quote from newwurldmn:
ITMN.

Interesting that my screens keep identifying both DNDN and ITMN as "great gamma buys"...

 

[spindr0]

Quote from dbh21:

I am looking at an IC for VVUS which has earnings in a week. The stock trades at $12, and the IV according to TOS for March options is 248% (following month is 150%).

Apr options should trade tomorrow. If their IV is toward the 150% of JUne rather than up in the 200's, you might be able to construct a double diagonal of sorts that captures IV contraction and isn't whacked too hard if the short strikes are breached.