Possibly in over my head

[atticus]

Quote from Pa(b)st Prime:

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?

Any position will need to be + on PnL within the range of the May atm straddle. The atm time spread is cheap, but it stands to be worthless in less than a week. I think it's a given that this stock moves at least 10 on the FDA.

You can take a shot on the 5/30 time spreads. It's a delta-bet. Assume the entire debit is at risk.

 

[atticus]

Quote from demoship:

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.

Any trade on DNDN is a gamble. The short straddle is a bad one. Virtually guaranteed to be a loser, so buy the straddle in May or June.

 

[cdowis]

Dan Sheridan gave a webinar on earnings report strategy. You might find it useful.

http://www.optionvue.com/Education_Sheridan.aspx
Click on the link at the bottom of the page.

Also, check out "Dan Sheridan's summer series on speculation II"
http://www.cboe.com/LearnCenter/webcast/archive.aspx

 

[paden]

i am out

thx to my er2 trades today, i was flat on the day

 

[arizonadreamer]

Paden,

Congrats! It takes a lot to close out something like this. It also takes a lot to post your information publicly and subject yourself to scrutiny. Best wishes in your future endeavors!

AZD

Quote from paden:

i am out

thx to my er2 trades today, i was flat on the day

 

[volatilitypimp]

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.

If they delay the decision, a RC spread would put you in a world of hurt. My own anecdotal observation is that odds are slightly in favor of a delay. I'm going to buy a ratioed calendar, short more May's.

 

[IV_Trader]

Quote from volatilitypimp:

If they delay the decision, a RC spread would put you in a world of hurt. My own anecdotal observation is that odds are slightly in favor of a delay. I'm going to buy a ratioed calendar, short more May's.

if you believe that decision will be delay ,then time fly is much safer trade than ratioed calendar :

sell 1 May
buy 2 June
sell 1 Jan08

Its a b/e even in case that they WILL go with May

 

[weewilly]

Quote from IV_Trader:

if you believe that decision will be delay ,then time fly is much safer trade than ratioed calendar :

sell 1 May
buy 2 June
sell 1 Jan08

Its a b/e even in case that they WILL go with May

I'm fairly sure he meant a reverse calendar -- buying the front month, selling the out month, same strike. It's a +gamma, -vega, "vol-crush" position.

 

[paden]

Well, isn't that special, it was an approval letter...

Currently pre-market around 6.60, inside my profit zone and I bet the IV tanks.

I will be looking at fading the gap, as I believe it will end up above 8, but might just stay away.

Wait, if I go in today, it might be a "revenge" play, that would be bad.



Overall, I am glad I am out, and I am glad I learned. I had way too much risk for my taste. I am playing with speculation money, but, that trade was not appropriate for me (and not really appropriate for the underlying)