GNTA high IV
- Thread starter AngusP
- Start date
The short answer is look for big front month skews. There you will find your biotechs. LOL.
Quote from MYDemaray:
Mav are you using OptionVu to find your front month skews? (right now I'm using TS, and they can't scan a universe of options for implied vols). Are there other ways to find pumped up vols on the front month? Thanks.
Yes, I use optionvue but there are a lot of places you can find this stuff. Try www.ivolatility.com as one source. If you have any Excel experience it's not that hard to create a macro to find these. There are a lot of message boards out there that are tied to various software vendors that where people will post these things.
You really should pick up some software. You don't need optionvue. There is a lot of freeware out there and really cheap stuff that can accomplish the same task, you just need to look around. Good luck.
Quote from MYDemaray:
Mav are you using OptionVu to find your front month skews? (right now I'm using TS, and they can't scan a universe of options for implied vols). Are there other ways to find pumped up vols on the front month? Thanks.
Yes, I use optionvue but there are a lot of places you can find this stuff. Try www.ivolatility.com as one source. If you have any Excel experience it's not that hard to create a macro to find these. There are a lot of message boards out there that are tied to various software vendors that where people will post these things.
You really should pick up some software. You don't need optionvue. There is a lot of freeware out there and really cheap stuff that can accomplish the same task, you just need to look around. Good luck.
About one second. LOL. Seriously, it takes one second. Sorry I have not responded to your PM yet, I'll try to get back to you this afternoon.
Been looking at some payoff's based on placing a ratio backspread on 27th April. Best compromise I can find is a 5:3 using the 15 and 20 strikes. Prices shown are based on eod - you may have done better by legging in during the day, or worse of course. 
I think this shows the dilemma. Price on the news would have needed to get above about 35 to show an immediate profit on a break to the upside. Otherwise you are left waiting for expiry above 19.47, and although the initial break on FDA approval may have been up to 35+, whether it would have stayed there until expiry is of course open to conjecture.
Given the break to the downside, there would have been a profit on Friday below about $11, and therefore a loss at all prices between 11 and 35. In reality I guess it may have been worse than that because an announcement that resulted in little movement would have lead to a volatility crush which would have widened those limits, and also given a greater loss in the 15 - 20 area.
I think this shows the dilemma. Price on the news would have needed to get above about 35 to show an immediate profit on a break to the upside. Otherwise you are left waiting for expiry above 19.47, and although the initial break on FDA approval may have been up to 35+, whether it would have stayed there until expiry is of course open to conjecture.
Given the break to the downside, there would have been a profit on Friday below about $11, and therefore a loss at all prices between 11 and 35. In reality I guess it may have been worse than that because an announcement that resulted in little movement would have lead to a volatility crush which would have widened those limits, and also given a greater loss in the 15 - 20 area.
.... and if you had waited until yesterday to close, the IV pulled in dramatically and you would have only got a profit below $8.30, which as it happens was not a problem. The downside is that if the announcement had been a non event the IV crush would have ensured very significant losses.
So I guess the moral is that these will always be high risk plays, and you really do need either a doubling or a halving of the stock price to get a profit in these types of trades.
Mav - please don't take this as any sort of criticism of your back-spread suggestion. You spelt out the risks clearly and I merely wanted to get a handle on what it meant in practise. If I'm talking b****x please say so, and we can all learn!
So I guess the moral is that these will always be high risk plays, and you really do need either a doubling or a halving of the stock price to get a profit in these types of trades.
Mav - please don't take this as any sort of criticism of your back-spread suggestion. You spelt out the risks clearly and I merely wanted to get a handle on what it meant in practise. If I'm talking b****x please say so, and we can all learn!