* UPDATE ARNA is trading $4.40, down 35.8% with IV30™ up 7.5%. <img src ="http://2.bp.blogspot.com/_hMry1m7UF10/TI9__P2MJeI/AAAAAAAAEu8/AubvdiTMopM/s1600/arna_summary_9-14-2010.gif"> On Thursday, July 29, 2010 I wrote: <b><a href="http://livevol.blogspot.com/2010/07/arna.html">Arena Pharma (ARNA) - Big Bio-tech Vol Yields Trade</a></b> ARNA was trading $6.45. The Livevol Pro summary from that date is included below. <img src ="http://1.bp.blogspot.com/_hMry1m7UF10/TI9__sJ51aI/AAAAAAAAEvE/1mHjOWo49eU/s1600/arna_summary.gif"> If you recall, we looked at a crazy 6 way spread which peaked PnL with the stock at $4 or $8 (ish) on Sep expo. The PnL chart is included (<a href="http://livevol.blogspot.com/2010/09/update-arena-arna-bio-tech-review.html">in the article</a>). Note that the dip on the upside PnL was between $5 and $7. This was done on purpose. It would reflect a belief that ARNA will be moving away from its then current price ($6.50). With the stock movement today, this trade actually worked out pretty well. This is trade analysis, not a recommendation. Details, trades, prices, vols, skews, charts here: http://livevol.blogspot.com/2010/09/update-arena-arna-bio-tech-review.html Legal Stuff: <a href="http://www.livevolpro.com/help/disclaimer_legal.html">http://www.livevolpro.com/help/disclaimer_legal.html</a>
IV30™ is a trademarked measure by Livevol. Volatilities marked as IV are for options (Implied Volatility). Volatilities marked as HV are for stock (Historical Volatility). IV30™ is the volatility of the hypothetical 30 day option (similarly IV60™ and IV90™ are the corresponding hypothetical volatilities for sixty day and ninety day options respectively). HV30™ is the realized volatility of the underlying. Similarly, HV10™, HV20™, HV60™ and HV90™ are the corresponding realized volatilities for the appropriate period. To compute IV30™, we take a weighted average of the strikes in two months; where each month is weighted appropriately and each strike is also weighted appropriately (greatest weight for the ATM strikes). The exact formula is proprietary.