SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Biotech / Medical : ABTI Alpha-Beta Technology
ABTI 0.200+99,900.0%Jun 17 12:34 PM EST
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: Cacaito who wrote (370)7/31/1997 11:51:00 PM
From: Zachary Prensky   of 572
 
Yes, at times there are option prices that made sense on a risk/reward basis. For instance, on Wednesday there was a time when you could buy the Aug 10 calls for 3$ and sell the Aug 12.5 Calls for $1.25. That meant that if the stock is above 12.5 on August 15th (hopefully after the announcement) you would buy the stock at 10 and sell at 12.5, reaping $2.50 for position that cost you $0.75 (3-1.25). So if you assume the odds of phase III success are 50/50, you are being paid 1.75 profit on .75 risk for being right. Thats over a 200% return. I tried executing that spread but didn't get all I wanted as others saw the trade and scrambled for it, moving the prices. Today you could buy such a spread for $1.25 - not cheap on the risk/reward scale. Other risk/reward combos that look good now is the Aug 7.5 put, which can be had for 1 1/8. If the trial is a loser, the stock is will open from 4 to 3 IMO. That's also a 200%-300% return if right.

A straddle at this point would be too expensive IMO. The Aug 10 Calls now go for $3.25. That combined with the Aug 7.5 Puts would cost $4.38. The stock would have to be above 14.38 or below 3.12 to start making money - not a favorable risk/reward. It might make sense for a conservative play long, as you would probebly get most of your principle back if the drug doesn't work, but not make much money if they did.

ZP

ZP

ZP
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News