Impact of future events on volatilities (ie. awaiting FDA approval etc.)

I had a well-tested strategy based on pure mathematics/stochastic.
But the market showed me that the "normally impossible" can still happen :-)
 
Atikon said:
When did that happen? What stock?
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Long ago, around 2015. It was another biotech like the said SRPT, don't remember which one it was, it just was in a very similar situation (awaiting FDA approval). Both SRPT and the other one were small companies then, the IV rose upto about 240% IIRC.
 
thecoder said:
Long ago, around 2015. It was another biotech like the said SRPT, don't remember which one it was, it just was in a very similar situation (awaiting FDA approval). Both SRPT and the other one were small companies then, the IV rose upto about 240% IIRC.
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Biotech Stock? :)
 
thecoder said:
Yeah, biotech or medical or something that. Traded just the options of the underlying stock.
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Yeah some industries tend to be very volatile, I would avoid pharma, biostocks and everything that is Highley affected by geopolitics (e. G. Energy/fx), no matter how good the backtest is. Also test for robustness.
 
Atikon said:
Yeah some industries tend to be very volatile, I would avoid pharma, biostocks and everything that is Highley affected by geopolitics (e. G. Energy/fx), no matter how good the backtest is. Also test for robustness.
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It depends on what side you sit: an option writer likes high IV as he gets higher credit (ie. the premium is higher). So, companies who need FDA approval, ie. biotech, medical, pharma etc., are IMO ideal for option writers, since, as shown with such FDA events, very high IVs happen...
 
thecoder said:
It depends on what side you sit: an option writer likes high IV as he gets higher credit (ie. the premium is higher). So, companies who need FDA approval, ie. biotech, medical, pharma etc., are IMO ideal for option writers, since, as shown with such FDA events, very high IVs happen...
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So you blew up and lost almost all of your gains but would recommend selling premium on the same stocks that made you blow up? What time frame are we talking about? Spy would give you a 7% return per year
 
I don't recall all the details of the strategy of then, but it was using weekly options, ie. timeframe was very short. Btw. the time was about June to October 2016, not 2015.
For the strategy to work, either the spot or the IV had to stay in a certain range. This failed.
No, at that time in the past I was intentionally interested in such risky trades for such high returns, b/c my math had showed me that it "should work" :-)
 
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