SEPR time spread

Quote from Maverick74:

I'm long the 20 calls and the 40 puts. It's like a straddle only it has a minimum value of 20 pts. The value of the straddle can not be less then 20 pts. By buying the DITM options, they have very little juice on them. That was a big concern for me. Because I believe vol will come in very hard after the news. I also have a 1 x 4 ratio which is aggressive. But that was my call and I'm willingly to live it.

Because of the high vol I sold in March, it takes a lot of risk out of that steep ratio. So as the stock drops, the puts are basically acting like short stock and the long calls will go from behaving like long stock to long OTM options thereby creating short deltas. I hope this explains things.
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Thanks for the explanation. It'll be interesting to see how that works out.
 
Quote from Maverick74:



I'm happy to have your support on this trade. As for the rest of my trades, well, if they don't work out and you have doomed me to losses then it's only fair that you let me trade with you and your uncle's money. LOL. Maybe Pabst can come along too. Share the wealth!
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No shot piker! To trade my unc's money, you'd have to be trading my money as well, and to trade my money you'd have to show me you can do a little more than just regurgitate Natenburg.
So unless your hollow conceptualizations transform into genuine understanding sometime soon, then CCM can offer you little more than a sincere wish of eternal losses and legendary pain... :D :p

Arb has stacks of hundreds taller than both of us, so when the inevitible occurs -- perhaps you can contact him and he might be willing to float you a line :)
 
Quote from Maverick74:

No gamma risk. I constructed this trade to minimize the vol implosion on the long premium. I did this by buying the guts. Very little vol premium on those. This gives me a lot of upside on either a big up move or big down move. By selling the march vol, I am pretty much protected if the stock doesn't move as the march vol will come in probably 50 pts. Basically, anything over 30 and I am styling. Also if the FDA rejects the drug, I am sitting pretty on a sharp move down to 15 or so. If the stock goes above 40, well, it will turn out very nicely. Personally this stock could open anywhere from 12 to 50. It's anybody's guess. I'm also leaning long deltas.

But this is a huge drug and would literally double the size of their company and make them a possible buyout candidate. The sleep aid business is a 3 billion dollar a year industry that will be over 5 billion in a couple of years. Right now, Ambien owns that space. But this drug supposedly does not allow the user to build up immunity to it over time and also avoids the common morning after hangover associated with sleeping pills.

But the situation is not as black and white as getting approved or not. The key will be in the wording. SEPR is looking for the FDA to verify the studies that show that it indeed does do the things it says it does. Also, shareholders of the stock are looking for some guidance as to how aggressively the drug can be marketed and sold. People want to see this drug on the shelves by this summer. That is very aggressive. So approval can take many forms. If the drug gets a full approval and they can get this thing out fast, well, $50 a share is not unreasonable.

Also, I am not long the Aprils. Aprils are way too pricey.
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I love it when guys who may happen to know a thing or two about the Greeks start acting like fundamental analysts. Sorry, but methinks thou hath no edge in that very different game. I suggest that you stick to your knitting if you desire to retain your standing among the neophyte ET multitudes who are far too easily impressed by relative fluency in the foreign tongue.
 
Quote from Hello_Dollars:

I love it when guys who may happen to know a thing or two about the Greeks start acting like fundamental analysts. Sorry, but methinks thou hath no edge in that very different game. I suggest that you stick to your knitting if you desire to retain your standing among the neophyte ET multitudes who are far too easily impressed by relative fluency in the foreign tongue.
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HD, care to explain what the hell your talking about? I don't think I gave any fundamental explanation for this trade. I did the trade for the march vol skew and the possibility that this stock could pop or get killed. This trade was not made based on any technical or fundamental criteria. Would you like to explain this a little further? You have me lost.

I don't think in the 2 years I have been posting on this site that I have ever made a technical or fundamental call. Are you sure you don't have me confused with somebody else?

In fact, I think I stated on this trade that I don't have any clue where this stock is going to trade after the announcement. How is that making a call? LOL.
 
Quote from Maverick74:

HD, care to explain what the hell your talking about? I don't think I gave any fundamental explanation for this trade. I did the trade for the march vol skew and the possibility that this stock could pop or get killed. This trade was not made based on any technical or fundamental criteria. Would you like to explain this a little further? You have me lost.

I don't think in the 2 years I have been posting on this site that I have ever made a technical or fundamental call. Are you sure you don't have me confused with somebody else?

In fact, I think I stated on this trade that I don't have any clue where this stock is going to trade after the announcement. How is that making a call? LOL.
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Then my misunderstanding. I thought all the talk about FDA approvals, sales potential, market opportunities, etc. was delving into the realm of the fundamental. Perhaps Greek is not the only language with which I, at times, have difficulty. Mea culpa.
 
Quote from Hello_Dollars:

Then my misunderstanding. I thought all the talk about FDA approvals, sales potential, market opportunities, etc. was delving into the realm of the fundamental. Perhaps Greek is not the only language with which I, at times, have difficulty. Mea culpa.
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Dude, I'll be honestly with you, I couldn't tell an FDA approval from a hooker and bag of a blow. I also couldn't even begin to tell you where this stock will be come Monday. The only reason I went on about the drug and the FDA and the company is because some people on this board like to have some background info on the stock at hand. All I know, is that this stock is going to move, period. How much and in what direction is beyond me. That is why I constructed the trade in the way that I did.

If you want my opinion, I'll tell you that fundamental and technical analysis is crap. I will never base my trades on those things not because I think they have no merit, but because I don't know how people will react to it. Somebody could whisper in my ear that this stock is going to get the approval and I load up on calls only to see they sell the news and I'm left holding the bag. All that shit means mean nothing. What I am interested in though is a catalyst. I'm looking for a spark. I'm looking for a kid with some gasoline and matches who is up to no good. I hope this explanation is suffice.
 
Quote from GATrader:

This thread needs a little love....Group hugs everybody... breathe in breathe out...in...out. It's only options!!
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Sometimes I really love this site!!!!:D :D :D :D

And now is one of them!
 
Quote from Maverick74:

.... The only reason I went on about the drug and the FDA and the company is because some people on this board like to have some background info on the stock at hand. All I know, is that this stock is going to move, period. How much and in what direction is beyond me. That is why I constructed the trade in the way that I did...
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And it's MUCH appreciated.

Thanks to everyone for sharing their knowledge. It's great to learn from everyone's knowledge and experiences. And best of all, it's free :cool:

Just got my "Option Volatility & Pricing" by Natenberg and "Pit Bull" by Buzzy Schwartz in the mail today. I can hardly wait for the weekend to dig into them. I've already started with "Pit Bull" and it's a great book, so far.

Best of Luck to everyone!
 
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