Nasdaq Biotech (IBB) - Option Bet with a Finger Print

Discussion in 'Options' started by livevol_ophir, Apr 9, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    IBB is trading 91.83.

    <img src="">

    The company has traded 10,500 options on one bet on total daily average option volume of just 1,578. All but 31 contracts today are from the single bet - sell calls to fund a put spread in May. The Stats Tab and Day's biggest trades snapshots are included (in the article).

    The Options Tab (in the article) illustrates that the trade today is almost entirely opening (compare trade size to OI).

    The bet is this:
    (1) Sell May 3500 95 calls @ ~0.62
    (2) Buy 35000 May 90/85 put spreads for ~$1.00
    Net -> pay $0.38 for the put spread but risk naked long side risk above $95.

    The Charts Tab (6 months) is included (in the article). The top portion is the stock price, the bottom is the vol (IV30&#8482 - red vs HV20&#8482 - blue). The yellow shaded area at the very bottom is the IV30&#8482 vs. the HV20&#8482 vol difference.

    Note on the bottom - I have highlighted two unusually high option volume days in the recent past - specifically Oct 19th and Nov 9th. The largest trades for those days are included (in the article).

    In Oct, a similar spread but to the other side was traded:
    (1) Sell 5,000 Jan '10 70 puts @ $0.70 to fund...
    (2) Buy 5,000 Jan '10 85/90 calls spreads for $1.05
    This pays $0.35 for the call spread but risked naked short side risk below $70.
    Result: At Jan expo the spread ended up losing the $0.35. I believe the 85 calls were closed out a few days prior to expo @ $0.30 for basically a push.

    In Nov the bet was different:
    Sell 2750 of the Jan '10 70/85 strangle @ $1.33 (I only show the first 2,250 in the snap).

    The bet makes money if the stock stays above $68.67 or below $86.33. This trade was a net winner for max gain - i.e. all $1.33 in premium was collected.

    So, it seems like the big better(s) in here tend to be decent recently - a break even and a a big winner (~$365,000).

    This is trade analysis, not a recommendation.

    Details, trades, prices, charts here:
  2. Anything stirring up with ISRG ?
  3. livevol_ophir

    livevol_ophir ET Sponsor

    Nothing I see - earnings and then one day to expo... Love that... the straddle will be pure earnings vol on Thursday at 12:58pm PST... To buy or sell?...
  4. Buy/sell? Depends on how much more they inflate Apr and/or May by Weds.
  5. Do you have any well-connected "sources" at the FDA? :confused: :D
  6. livevol_ophir

    livevol_ophir ET Sponsor

    I don't... :(
  7. SLACKARD !!!

  8. livevol_ophir

    livevol_ophir ET Sponsor

    I'm submitting a screen play (feature film) with the FDA Chairman playing a role in a subplot - does that count?...
  9. If the film doesn't pan out, you should be able to condense the screenplay down to an episode of CSI and Law & Order. :cool:
  10. livevol_ophir

    livevol_ophir ET Sponsor

    Lol.. I've written a pilot too - right there with you...
    #10     Apr 9, 2010