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.
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.
Dan Sheridan gave a webinar on earnings report strategy. You might find it useful. http://www.optionvue.com/Education_Sheridan.aspx Click on the link at the bottom of the page. Also, check out "Dan Sheridan's summer series on speculation II" http://www.cboe.com/LearnCenter/webcast/archive.aspx
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
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.
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
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.
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)