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Strategies & Market Trends : Swing Trading With Options
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To: underdog430 who started this subject7/30/2001 11:39:15 AM
From: underdog430  Read Replies (2) of 88
 
AVIR Straddle Follow-Up

An AVIR AUG 40 straddle cost around 14.40 with the stock trading at around 41 on the day before it was halted due to the 2-day FDA meeting. With the stock trading at around 29 this morning, the AUG 40 straddle is trading between about 10 and 14. So the stock dropped about 12 points but the put only went up about 3 to 7 points. Volume is terrible (only 148 on the put) even though volume on the underlying is high. Unless you were unlucky enough to get out at the low, you probably broke even on this trade.

A strangle entered about a month ago looks like it would have gone from around 10 to around 22. If the stock had gotten approval from the FDA, however, you could have gotten really hurt. If you're going to roll the dice you might as well just buy a put.

The underlying moved on the lower end of expectations (a larger move up or down was expected) but if you still came out intact then that isn't too bad. As I indicated previously, I thought that this was an interesting trade. What I didn't like was the volatility and the risk which that volatility entailed.

Here's a question - can you get out of a position for which there is open interest but no volume? For example, an AVIR AUG 55 put has about 25 points of intrinsic value but no volume. The bid/ask spread is terrible but can you sell it anyway or would you just have to exercise it to get your money?

Mark
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