EXAS April options mis-priced

[oldnemesis]

'there's no explicit edge unless you have insider info'

I'm sure you realize that trading on insider information is illegal. I made it a point NEVER to hold stock or options on any company that I served as a consultant and thus had access to information before it was made public.

To do otherwise is asking for a jail term at Allenwood.

http://www.foxnews.com/story/0,2933,113417,00.html

 

[donnap]

I don't think that that was what he meant. He was talking about edge, not legality.

There's at least two ways to approach it, or a combo of the two.

You can be a pure vol trader and sort out opps, or you can take a more fundamental approach and study the drug and cash flows and project some stock price. Not interested in becoming a pharm expert.

I suppose that you could also come up with a variety of pre-event plays.

Optioncoach's calendar was a combo of the two approaches and was about the best biotech play that I saw. The low vol play is a little counterintuitive.

He made a solid public hypothesis for the 35 price. Of course, there's other reasons for doing that.

And he still carried the pass/fail risk, hence the low risk calendar. Obviously, saying that it went straight to his strike is oversimplifying it.

But was he spot on, or just lucky?

And then there's the issue of sustainability or repeatability. If you can't repeat it, there's not much value.

 

[cdcaveman]

Quote from donnap:

I don't think that that was what he meant. He was talking about edge, not legality.

There's at least two ways to approach it, or a combo of the two.

You can be a pure vol trader and sort out opps, or you can take a more fundamental approach and study the drug and cash flows and project some stock price. Not interested in becoming a pharm expert.

I suppose that you could also come up with a variety of pre-event plays.

Optioncoach's calendar was a combo of the two approaches and was about the best biotech play that I saw. The low vol play is a little counterintuitive.

He made a solid public hypothesis for the 35 price. Of course, there's other reasons for doing that.

And he still carried the pass/fail risk, hence the low risk calendar. Obviously, saying that it went straight to his strike is oversimplifying it.

But was he spot on, or just lucky?

And then there's the issue of sustainability or repeatability. If you can't repeat it, there's not much value.

there can be edge if by taking the event and straddling it on the calender with a long calender spread.. but your basically short gamma and you are very exposed to any price action outside of a range.. its very nonlinear... and its just not that simple either..you can put your calender on atm and be ditm at the point in time in which you had on your plan to exit.. but long calenders are limited risk so its about the only thing i've seen reasonable mentioned.. but your way late on this trade respectively

 

[atticus]

Quote from cdcaveman:

there can be edge if by taking the event and straddling it on the calender with a long calender spread.. but your basically short gamma and you are very exposed to any price action outside of a range.. its very nonlinear... and its just not that simple either..you can put your calender on atm and be ditm at the point in time in which you had on your plan to exit.. but long calenders are limited risk so its about the only thing i've seen reasonable mentioned.. but your way late on this trade respectively

Straddling the calendar? You mean strangled-cals?

 

[cdcaveman]

Quote from atticus:

Straddling the calendar? You mean strangled-cals?

ahh i'm just talking about spreading across the term structure in a way that straddles the event... bad way of putting it i know...

sell one that expires before the event.. buy one that expires after..

 

[newwurldmn]

Quote from cdcaveman:

ahh i'm just talking about spreading across the term structure in a way that straddles the event... bad way of putting it i know...

sell one that expires before the event.. buy one that expires after..

This can work but generally the vol surface is priced efficiently. So unless you are able to determine a different timing of the event than the market or you are able to predict option flows better there won't be much money in this.

And there are many situations where the event can come early - then you are hosed. Because you will have paid something like $10 for a calendar that should have been worth 50 cents.

 

[cdcaveman]

Quote from newwurldmn:

This can work but generally the vol surface is priced efficiently. So unless you are able to determine a different timing of the event than the market or you are able to predict option flows better there won't be much money in this.

And there are many situations where the event can come early - then you are hosed. Because you will have paid something like $10 for a calendar that should have been worth 50 cents.

yeah the event changing dates to inside the front expiry would be the worst that could happen to ya..

 

[newwurldmn]

The event moving outside your back expiry is pretty bad as well.

Another way a $10 calendar becomes 50 cents.

 

[cdcaveman]

Quote from newwurldmn:

The event moving outside your back expiry is pretty bad as well.

Another way a $10 calendar becomes 50 cents.

well none the less you can't get called out.. and your limited to the boutght premium..

 

[atticus]

Quote from cdcaveman:

ahh i'm just talking about spreading across the term structure in a way that straddles the event... bad way of putting it i know...

sell one that expires before the event.. buy one that expires after..

That's the point. The OP's premise is that APR19 is safe, and there is no edge outside of APR. Obv the mkt doesn't believe APR is outside the reporting window. I guess we'll know in two weeks.