Possibly in over my head

Quote from daddy'sboy:
You admit to not really knowing what will happen (and have already got evidence of predicting incorrectly) and thus I suggest you limit your loss now and close the position before atticus' prediction becomes reality.
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As DB said, get out now. Learn some lessons & move on.

While I know that you do not want to hear it, this outcome (or worse) was inevitable w/ your approach and your lack of knowledge (do you even know what the impact would be if DNDN moved as Atticus stated? Which is likely btw). The IV crush after the GOOG earning's release w/o any huge move in the stock gave you a nice profit. On another day, it could wipe out your account. If you want to play with fire, at least take the time to educate yourself on the risks and rewards of the different types of 'fire'. There are many books on these topics and a number of educational threads here on ET - some specifically on playing event's (like earnings) IV crush.
 
I too recommend getting out. Things may work out for you if 1) there is a delay is the announcement or 2) there is very little movement in the underlying after the announcement.

But you DO KNOW that there is activity in the 2.5 puts and even in the 50 calls, right? Something to seriously think about.

Good Luck,

AZD
 
I was afraid to post my decisions thus far, as I figured the flogging would get worse... here we go

1. I posted on here to get advice from those far more knowledgeable than I, did I listen, yes, did I heed, no.

2. I decided to trade the underlying based on it's action, as I am lopsided with the short calls, resulting in a covered call/strangle position... yes, i really did

3. The pricing today was perfect for my strangle. It moved solidly into my profit zone, so...

4. I took no action on my strangle as of yet. Most likely, I will tomorrow, as I am starting to lose sleep
 
Quote from atticus:

Ratio spread on DNDN? The stock price will express a binary outcome on the FDA.

You're looking at $3 or $40. So, by all means sell a backspread and watch your account disappear.
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I must be learning something because I understand every word of your post. :)

Calander play? I see the massive IV skew toward May. June's are cheap and yea I know the play is over before May ex but there'd seem to be a chance to own something in June that's got potential.

I don't know enough about the behavior of biotechs (although I got CREAMED in ENMD several years back) to be helpful but will this thing trade in a narrow new value range or possibly whip around after the announcement?
 
My current thoughts are:

2/3 chance of being in a profitable position, now that I am long some of the underlying

1/3 chance of an account blowout.

Why?

Three probable outcomes/price results of the underlying

All of which after action halted, or after hours... ugh

1. Approval, most likely at or above 29 immediately for the underlying, possibly higher given short interest

2. Denial, most likely at or below 4 immediately following the news.

3. Delay, my best guess is 8 to 13 with a delay, with a high possibility of being lower.

Calendar is a bad idea, as the back month value will fall faster than the front month after the news. I was notified of this, and verified with testing.

Basically, I need to either stick it out, ir cut it loose.

What about timing of the release? My guess is Friday, but I am not willing to place any more bets at this time.

Heck, I dont' even gamble (normally)
 
Anyone RCing this? The spreads have narrowed in the nearer terms/far terms, but given an expected vol crush to pre 3/30 levels in the far terms, it's still a massively better choice than the front ATM straddle.
 
paden, if you don't like to gamble, then you should definately close this position out asap.

Shorting a straddle on DNDN is a straight up gamble.
 
jj90, can you go further into your thoughts? I am not sure what you mean...

Are you saying that a calendar would be a decent choice to reduce risk?

I believe it is irrelevant, as I will most likely be exiting the position tomorrow.

But, I do want to learn, plus, someone else could learn from my situation.
 
Quote from jj90:

Anyone RCing this? The spreads have narrowed in the nearer terms/far terms, but given an expected vol crush to pre 3/30 levels in the far terms, it's still a massively better choice than the front ATM straddle.
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yes
 
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