SEPR time spread

riskarb · Feb 24, 2004

Long the SEPR mar/APR 30 call spread a $.50... a total flyer here -- FDA decision imminent. Looking to offset at a buck or better.

riskarb

Jackdaw · Feb 24, 2004

riskarb - Just to be absolutely clear, do you mean sell March and Buy April? Only out of interest - I already have a position on SEPR!

Maverick74 · Feb 24, 2004

Quote from riskarb:

Long the SEPR mar/APR 30 call spread a $.50... a total flyer here -- FDA decision imminent. Looking to offset at a buck or better.

riskarb

I also have a position in this baby. I have a calendar ratio backspread. Expecting FDA approval Monday, stock could see 40 to 50 or go to 15 on a rejection. There is some heavy action going on in the options. The march 35/37.5 call spread has been trading 25k to 45k times every day.

StillTrading · Feb 24, 2004

I thought were best in sideways markets. If one is expecting a large move regardless of direction, why would one chose a calendar spread?
Not flaming just curious.

ig0r · Feb 24, 2004

Quote from Maverick74:

I also have a position in this baby. I have a calendar ratio backspread. Expecting FDA approval Monday, stock could see 40 to 50 or go to 15 on a rejection. There is some heavy action going on in the options. The march 35/37.5 call spread has been trading 25k to 45k times every day.

Just curious, if on FDA decision there will be a big move, why not put on straddle? too expensive?

Edit: didnt notice stilltrading's similar post, question still stands

riskarb · Feb 24, 2004

Quote from Jackdaw:

riskarb - Just to be absolutely clear, do you mean sell March and Buy April? Only out of interest - I already have a position on SEPR!

right, referring to buying the spread as it incurs a debit.

Buying April, selling March.

riskarb

riskarb · Feb 24, 2004

Quote from ig0r:

Just curious, if on FDA decision there will be a big move, why not put on straddle? too expensive?

Edit: didnt notice stilltrading's similar post, question still stands

the Mar 30 straddle is trading well over 6, was over 8 last week. I've been told there is a lot of insider buying in this stock, so I wouldn't be suprised with an FDA approval, but I think it's priced into the shares.

I really don't care what happens, but $30/share on Monday would be nice. ;-) I'm long 50 of these from $.50, a small position.

riskarb

riskarb · Feb 24, 2004

Quote from StillTrading:

I thought were best in sideways markets. If one is expecting a large move regardless of direction, why would one chose a calendar spread?
Not flaming just curious.

because the spread is cheap. volty will come in, but the debit accounts for the vol-implosion we'll see. gamma is the concern here.

riskarb

waggie945 · Feb 24, 2004

GAMMA, GAMMA, GAMMA, GAMMA, GAMMA!!!

Riskarb, yu da BEST man!
But I bet you learned everything about "Option Volatility & Pricing" not from Sheldon Natenberg, but rather from James Stock!

Maverick74 · Feb 24, 2004

Quote from StillTrading:

I thought were best in sideways markets. If one is expecting a large move regardless of direction, why would one chose a calendar spread?
Not flaming just curious.

I sold the front month skew. March vols were trading around 100 to 110. Buying the straddle I don't think is a good play because its too rich. I'm not long a straddle. I'm long the guts pretty far out, they basically act like stock, not like long options. The vol is going to implode big time on the announcement. By selling the front month skew, I will still make a handsome profit even if the stock makes a small move. The straddle buyer will get crushed on a small move.