Strategical Timing of an Important News Release

Q

Quanto

Strategical Timing of an Important News Release

Company is a biotech and has some weeks ago announced
to release "in December 2023" the results of its
clinical study of a new product in development.

Since the release date is not a fix date, then the company
can release the news strategically on a date in December of its choice.

When studying the options data (especially the OpenInterests),
can one say whether the news will be released before
the expiration date of the December options, or later?

Company Market Cap: ~ 200M
Sector(s): Healthcare
Industry: Biotechnology
Full Time Employees: ~ 50

An analyst believes that if this new product of the company is approved by the FDA,
it could generate approximately $1.5 billion in peak sales in the United States alone.

(The situation and the data is real, but ticker is not revealed).

Code: 
Ticker: XXXX
As of date: Today, 2023-12-06-We
Current stock price = 7.15

Calls for 2023-12-15:
Strike  Volume  OpenInterest
 2.50       4        4
 5.00      23       31
 7.50      85      228
10.00      35       99
12.50    1076      323
15.00      24      417

Puts for 2023-12-15:
Strike  Volume  OpenInterest
 2.50     515     2769
 5.00    1063     4412
 7.50       1       90
10.00       0        4
12.50       0       15
15.00       0        0
 
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The sentiment seems to be that the market expects the stock price to fall due to bad news (cf. the high OIs of OTM Puts).
I think the company will release the said news only after the expiration date of the December options, to let the about 7200 OTM Put contracts first expire worthless... :D
 
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Quanto said:
Why not?
Just analysing it to bring logic into the trade decision.
More...

I think you can extract more insight analysing order book continuously, i.e. tracking changes in bid/ask volumes as potential date of release is approaching and in response to unusual changes in the order book (maybe somebody will leave a footprint in some way). The state of the order book at a particular point of time isn't so informative
 
kroxobor said:
I think you can extract more insight analysing order book continuously, i.e. tracking changes in bid/ask volumes as potential date of release is approaching and in response to unusual changes in the order book (maybe somebody will leave a footprint in some way). The state of the order book at a particular point of time isn't so informative
More...
Very true. But even just the above data of yesterday shows already an unusual change, a footprint:
watch the high Put volumes of the day: it makes more than 20% of the OIs of OTM Puts.
I'll continue watching these interesting data in the remaining 8 days till expiration.

Btw, which options strategy would fit best in such a scenario:
- an important event is to happen "sometime in December 2023" (FDA decision etc.)
- very high IVs in both Calls and Puts (--> premiums are high, ie. long options are too expensive)
- also analysing the options data (the development of the Volumes and OIs etc)
- I think one should make a trade with December expiration, and another one with January expiration b/c the situation seems to offer 2 opportunities, not just 1...
?

(I think a ShortStrangle is good for December since it seems stock won't change much till expiration on Dec 15, and for January it seems one needs a bearish strategy since the options data indicate that the stock will fall b/c news being expected as bad... but still monitoring the developments in the options data...)
 
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Quanto said:
I plan to reveal the ticker today at 13:00 EST.
You can guess till then... :cool::D
Related: https://www.elitetrader.com/et/threads/live-options-research-results.377300/
More...
Ok, here is the ticker: RPHM (Reneo Pharmaceuticals, Inc. in Irvine, CA --> https://reneopharma.com )
It's very risky (IVs are very very high) due to uncertainty b/c of the said expected news release in December (clinical study results for FDA decision etc. or something that --> study the company press releases at their IR webpage).

RPHM.png


Disclaimer: this is not a trading advice; it's just for study/research/analysis only.
 
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