Biogen halted, options expiring today.

Discussion in 'Options' started by FSU, Nov 6, 2020.

  1. FSU


    So you say you know your maximum risk holding a vertical spread as long as you close by expiration? Along comes Biogen which was halted earlier. Could be very ugly for holders of any expiring options here, long or short, as the options never reopened.
    guru likes this.
  2. Seems like this would only affect those who were 1) ITM, 2) planning to get out before the close, and 3) didn't manage to do so before the halt. Also, those who were holding spreads where the price punched all the way through would have the wing auto-exercised - so the only ones who can get really hurt are people holding trades in which the price landed between the short and the long. Seems like that would be a rather small subset, no?

    I agree that it's a risk people should know about. But then, trading pharmas and biotech is prone to that kind of crazy crap, and if anyone trading them doesn't know it, this will hopefully be a belated wake-up call...
  3. newwurldmn


    If you are short puts you are fucked. Stock will open 80 points down on Monday.

    If you were trading the name you should have known it would be halted today.
    jys78 and BlueWaterSailor like this.
  4. FSU


    It will affect a lot of people. It was halted early, so those who planned to get out today couldn't. You're short a way out of the money put spread? Screwed as your short puts will most likely be manually exercised and you probably won't be able to exercise your longs in anticipation as it would require a lot of capital. Auto exercise may also be turned off due to the trading halt.
    So many different ways to be screwed here as most likely you won't be able to exercise your longs with many firms depending on your cash and you don't know what will happen to your shorts.

    Edit to add The OCC just put out a memo and auto exercise will be based on the last price before the halt
    Last edited: Nov 6, 2020
  5. zdreg


    How would you have known?
  6. FSU


    I was trading it yesterday and had no clue it would be halted all day today. No position for me fortunately.
  7. Overnight


    This is why I do not understand options. Some folks here make their money selling puts by getting the fun money up front, and I am told that is a great way to make money in them.

    Meanwhile I'm like, isn't it safer just buying a call, and getting the risk out of the way ahead of time?

    Most stocks go up over time. You know, ones with big balance sheets and stuff. Why not buy the calls? Worse that can happen is you are assigned them, and you own a shitty stock. Like buying XOM in February.
  8. newwurldmn


    If you have traded biotechs extensively you would have known.

    if you haven’t then you should have studied how other adcom meetings go.
    Last edited: Nov 6, 2020
  9. newwurldmn


    If you buy a call you have a hurdle rate. It’s been shown this hurdle rate is generally higher fair value of the call
  10. Why the Halt all day after FDA strong refusal? My friend is stuck with puts and yet he does not panic.
    #10     Nov 6, 2020