Possibly in over my head

Discussion in 'Options' started by paden, May 4, 2007.

  1. Any position will need to be + on PnL within the range of the May atm straddle. The atm time spread is cheap, but it stands to be worthless in less than a week. I think it's a given that this stock moves at least 10 on the FDA.

    You can take a shot on the 5/30 time spreads. It's a delta-bet. Assume the entire debit is at risk.
     
    #21     May 8, 2007
  2. Any trade on DNDN is a gamble. The short straddle is a bad one. Virtually guaranteed to be a loser, so buy the straddle in May or June.
     
    #22     May 8, 2007
  3. cdowis

    cdowis

    #23     May 8, 2007
  4. paden

    paden

    i am out

    thx to my er2 trades today, i was flat on the day
     
    #24     May 8, 2007
  5. Paden,

    Congrats! It takes a lot to close out something like this. It also takes a lot to post your information publicly and subject yourself to scrutiny. Best wishes in your future endeavors!

    AZD

     
    #25     May 8, 2007
  6. If they delay the decision, a RC spread would put you in a world of hurt. My own anecdotal observation is that odds are slightly in favor of a delay. I'm going to buy a ratioed calendar, short more May's.
     
    #26     May 8, 2007
  7. if you believe that decision will be delay ,then time fly is much safer trade than ratioed calendar :

    sell 1 May
    buy 2 June
    sell 1 Jan08

    Its a b/e even in case that they WILL go with May
     
    #27     May 8, 2007
  8. I'm fairly sure he meant a reverse calendar -- buying the front month, selling the out month, same strike. It's a +gamma, -vega, "vol-crush" position.
     
    #28     May 8, 2007
  9. paden

    paden

    Well, isn't that special, it was an approval letter...

    Currently pre-market around 6.60, inside my profit zone and I bet the IV tanks.

    I will be looking at fading the gap, as I believe it will end up above 8, but might just stay away.

    Wait, if I go in today, it might be a "revenge" play, that would be bad.



    Overall, I am glad I am out, and I am glad I learned. I had way too much risk for my taste. I am playing with speculation money, but, that trade was not appropriate for me (and not really appropriate for the underlying)
     
    #29     May 9, 2007