VSAR Calls Sky High

[sle]

There's nothing to figure out really... it's a total gamble. Boom or bust.

In your opinion, do you think biotech events like these are over or under-priced? I am tempted to do a study but don't have the energy or the time...

 

[newwurldmn]

In your opinion, do you think biotech events like these are over or under-priced? I am tempted to do a study but don't have the energy or the time...

There used to be a two long vol biotech funds that did pretty well. Not just buying calls and puts, but actually betting on the vol. I can PM you their names. Both never got very big (100mm or so) and both have shut down - not for performance reasons

 

[JackRab]

In your opinion, do you think biotech events like these are over or under-priced? I am tempted to do a study but don't have the energy or the time...

I don't know... hard to say. I haven't followed those in normal circumstances lately. I did trade in a few when I was a MM.

If you did a comprehensive study, you mainly look at the averages. While the outliers are the problem.
What is the usual 30 or 60 day impl vol for small biotechs? 80-140, 18-32% straddle...?
4-7% daily move... but I don't think you want to end each day delta flat.

Uhm, back in the day I usually wanted to be gamma long the small biotechs. Or at least have no risk whatsoever at +/- 50% and beyond. As a market maker you want to make a ton of money at those moves... there are lots of ways to make money with options when a stock is volatile. I tried to be long straddle and short 15% out wings and very long the tiny ones... but even short straddle with enough protection would be okay.

Doesn't really answer your query haha

Maybe the event vol might be too high, and normally it's okay or low... that would be my guess. With an event coming up, nobody really wants to be gamma short IMO.

 

[jdib]

Would love to know what some of you think.

So today a very similar situation occurred - AXON got pummeled because it failed an Alzheimer's study. Does anyone see any correlation in the options movement before the AXON tanked? Looks like those options were even higher than VSAR.