If you don't mind, can you explain a little about the last part of your previous post about ratio backspread. And are you biased on the outcome of the FDA decision or do you only care about volatilitiy. Also, how do you know about the FDA decision and when they will reply? Anyways, I like how you focus on the biotech sector. Give me some hot picks, haha.
magic journal of doom
- Thread starter magicz
- Start date
hey JB3 welcome to my brain take a sit and relax. Let anwer a few of your questions.
I use both directional bias and high vol to get into a ratio backspread position. Without these two component you will be a big loser because if you look at the graph for a call ratio backspread, you will see what I call the pit of doom at exp if the price is at the upper strike. The saving grace is if the price stay stagnant you can always sell verticals or transform it into flies to offset the POD. Of course direction is not important in this strat but you do need to make sure it does move and move big one way or the other. Also I like this strat over other strats with similar risk profile is because you can put it on at about even money or a credit. While most of the other you are usually debit to open and/or have greater loss on the down side.
Nothing like a pending FDA decision to increase vols and direction bias.
. Well most FDA announcement are scheduled way in advance and the biotech companies will disclose these dates. I usually open 1 to 2 week before and close it as soon as the day of the announce becasue vol will collapse. Never try to hold this strat to exp even if you are in the money, even, or in the pit of doom. Once vol collapse thats all she wrote and make another play somewhere else.
As for what I am looking at this month PGNX.
I use both directional bias and high vol to get into a ratio backspread position. Without these two component you will be a big loser because if you look at the graph for a call ratio backspread, you will see what I call the pit of doom at exp if the price is at the upper strike. The saving grace is if the price stay stagnant you can always sell verticals or transform it into flies to offset the POD. Of course direction is not important in this strat but you do need to make sure it does move and move big one way or the other. Also I like this strat over other strats with similar risk profile is because you can put it on at about even money or a credit. While most of the other you are usually debit to open and/or have greater loss on the down side.
Nothing like a pending FDA decision to increase vols and direction bias.
. Well most FDA announcement are scheduled way in advance and the biotech companies will disclose these dates. I usually open 1 to 2 week before and close it as soon as the day of the announce becasue vol will collapse. Never try to hold this strat to exp even if you are in the money, even, or in the pit of doom. Once vol collapse thats all she wrote and make another play somewhere else.As for what I am looking at this month PGNX.
good old Monday,
well my ToS account is now funded with 8K. My original intent was 10K but I put the other 2K in my 6 months old son 529 account instead. To me 8K and 10K isnt much of a difference but when he's 18yo that would definately make his day if his pappa made the right investment in that 529.
I am not anxious to throw my money in any trade yet still looking for a good trade that make sense to me. I am still analyzing my option strats on high vol stock. Taking any suggestion? I need some new idea. I have been analyzing tons of variation on ratio spread and flies. I am having a brain cramp.
well my ToS account is now funded with 8K. My original intent was 10K but I put the other 2K in my 6 months old son 529 account instead. To me 8K and 10K isnt much of a difference but when he's 18yo that would definately make his day if his pappa made the right investment in that 529.
I am not anxious to throw my money in any trade yet still looking for a good trade that make sense to me. I am still analyzing my option strats on high vol stock. Taking any suggestion? I need some new idea. I have been analyzing tons of variation on ratio spread and flies. I am having a brain cramp.
What a day What a day!!!
miss out on a big move on PGNX while I was watching "Little Einstien" with my boy. But I did enter my option position right after.
sell 10 put 10@3.10
buy 5 put 7@1.60
4/3 reward risk profile. if everything goes wrong the stock will trade at cash level or 5 per share lost of around -$1500. My profit is capped at around $2200. I will adjust the position as price goes up or down before the FDA(4/30/2008). The stock gained $1.46, which is a huge 22% jump. I will dump this position if the stock go past 9 preFDA. I dont like to gamble on the FDA announcement but the two weeks preFDA build up is always good to me.
IMO "C" is a good play right now. The chart look bullish, close to resistence level, the vol is low and it sit right at 25. a short Strangle here would make some money. I'll look more at it tonight.
miss out on a big move on PGNX while I was watching "Little Einstien" with my boy. But I did enter my option position right after.
sell 10 put 10@3.10
buy 5 put 7@1.60
4/3 reward risk profile. if everything goes wrong the stock will trade at cash level or 5 per share lost of around -$1500. My profit is capped at around $2200. I will adjust the position as price goes up or down before the FDA(4/30/2008). The stock gained $1.46, which is a huge 22% jump. I will dump this position if the stock go past 9 preFDA. I dont like to gamble on the FDA announcement but the two weeks preFDA build up is always good to me.
IMO "C" is a good play right now. The chart look bullish, close to resistence level, the vol is low and it sit right at 25. a short Strangle here would make some money. I'll look more at it tonight.
The Hump day is always good when you're working and look forward to the weekend. Its just another day in the market though.
I adjusted my position today sold back the 7.5 puts and cover my downside risk with a sell short order of 1000 share if the price go below 7.5 and a trail stop of .50 just incase it reverses. This is will give me better downside protection with out the up front cost.
I am still looking for a play on C, I am thinking of writing Jun/May 25 puts. Also DNDN november 10 put looks really attractive to write @6.25. the share is sitting at 5.6 you are geting the share for 3.75 with news of the phrase III at the end of the year coming later this year. more for later.
I adjusted my position today sold back the 7.5 puts and cover my downside risk with a sell short order of 1000 share if the price go below 7.5 and a trail stop of .50 just incase it reverses. This is will give me better downside protection with out the up front cost.
I am still looking for a play on C, I am thinking of writing Jun/May 25 puts. Also DNDN november 10 put looks really attractive to write @6.25. the share is sitting at 5.6 you are geting the share for 3.75 with news of the phrase III at the end of the year coming later this year. more for later.
C put is close out too. both trade so far have meet or exceeded my goal for them. PGNX is still going strong the stock gone up to 11.74. the puts would have netted me an extra $500 but who's counting. C is still going strong to the plus side also. Well I am gonna take a long lunch here in the west coast so probably done for the day.