Biogen halted, options expiring today.

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

  1. FSU


    Because the stock is expected to fall substantially. If you have a put that is out of the money based on the last price before it was halted and is expiring today, you would want to exercise it to get short stock and profit from the expected drop.
    #21     Nov 6, 2020
    Apologetik and qlai like this.
  2. This is why you don't sell puts on crazy shit like biotech, pharma, etc. Not unless your risk tolerance is WAY the fuck above average and you're aware of all the factors involved... or you're just a plain damn fool looking for YOLO trades. To me, even the first category is like trading penny stocks: some people can make a go of it, but 99.99%+ blow out.

    Didn't I warn you about that stuff? ;) If there was a method for "getting the risk out of the way", then everybody would be doing it. Buying calls, unless you have a way to be right on direction and time, is just a way of bleeding to death slowly. You futures guys, always looking for simple answers... o_O

    You're not going to get assigned if you're long a call - unless you want to be (or get caught in a once-in-a-lifetime situation like this one.) But again, theta is going to attach itself to your kidney and suck you dry if you buy options.

    But yeah, unless you're looking to get wrecked, it's a pretty good idea to at least do a quick scan of the underlying and see its history. You'd be amazed at how many of the stocks "with big balance sheets", etc., are NOT going up over time... and there's no guarantee that even the ones that are won't take a dump. It's rare, but I can think of half a dozen "rock-solid" stocks that crashed and burned off the top of my head.
    #22     Nov 6, 2020
    Apologetik and TrailerParkTed like this.
  3. FSU


    Its a thing (auto exercise being turned off for a halted stock) , although not the case here. The last stock I remember auto exercise being turned off was Luckin coffee when it was halted.
    Here is the OCC memo turning it back on after the halt was lifted.
    #23     Nov 6, 2020
    BlueWaterSailor likes this.
  4. Thanks - good to know!
    #24     Nov 6, 2020
  5. Will the people who sold naked puts get assigned with the stock being halted do options still trade? In 2015 I bought during their announcement in AH as it was screaming from $300 to $379 down to $230 next day. Lost $5000 being stupid on BIIB. Took it off my list and avoid them before big news.
    #25     Nov 6, 2020
  6. Yes, the holders of the long puts will surely exercise if they have good reason to believe the stock will trade well below their strike on Monday. Even if there was no stock trading in AH. They have until the OCC cutoff, or their broker's to do it. They aren't sure exactly where it will open but they know it will be profitable. Sucks if you got caught in this. Tradin' ain't easy!
    Last edited: Nov 6, 2020
    #26     Nov 6, 2020
    TrailerParkTed and MoreLeverage like this.
  7. Last time the news was better in 2015 from $385 Hi in AH to $220 in AH to open at $230(Remember it) next day. 2015 Alz was a positive spin suckers like me bought into while pros with bio-finance knew it was meaningless.
    #27     Nov 6, 2020
  8. Overnight


    It is because futures are simple. You options guys are always over complicating things. *sniffs* I don't like you at the moment.

    EVERY STOCK IN THE UNIVERSE, except energy, has gone up since the March lows! BOLLOKS!

    (Dude, I think long term. That is why I try to swing futures. Because they are the future. I really need to get the hell into a self-directed account for stocks. Fuck options, you options guys are balls-to-the-wall insane.)
    #28     Nov 6, 2020
  9. Hivey


    What's the reason it got halted the whole day? Looking at their chart I see the reason for a halt, but not perse why it's for the whole trading day and especially not on expiration day.

    Some people go bankrupt on this... of course, not the pro's, but the less experienced traders. IV and associated premiums in this stock were insane and I'm sure some traders decided to sell put spreads on this one, where the spread itself would have been very low risk, but the individual short options in that spread not.
    #29     Nov 7, 2020
  10. Hivey


    Sometimes the risk isn't always that clear. Especially not for beginners that trade spreads. They think the value of the spread is the risk, but obviously there's more than that.

    A few months after I started trading I lost $15k because I traded 50 calendar spreads, for a total debit of $500, where I got assigned on the short leg (even though expiration was still 6 months out!!). I thought my risk was only $500, but god was I wrong.

    Due to the assignment my buying power got very negative and my broker auto-liquidated all stock directly the next morning straight at the open + some of my other positions.

    Although my short stock was fully covered by the long options, with no delta at all, theoretically there was no risk, but due to the risk management policy & algo's of my broker my whole account got messed up. They didn't liquidate the long options, so now the delta on this position was huge. I tried to close and repair everything asap, but with the wide markets at the open and stock moving in unfavorable direction, this joke cost me quite a bit.

    Had they not auto-liquidated everything directly and given me an hour to resolve the issue, it would have all been fine though. Just an example to illustrate how newer traders can blow up without them realizing they have a risky position on.
    #30     Nov 7, 2020
    yc47ib, MoreLeverage, qlai and 2 others like this.