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Biotech / Medical : Biotech Valuation

CRSP 56.89

+1.2%

Jan 14 3:59 PM EST

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To: Biomaven who started this subject	12/9/2003 2:21:01 AM
From: tuck	Read Replies (2) of 52153

Peter, This might be OT to some. I can't help noticing that the BBH -- the Biotech Holders -- which at least has actual biotechs in it, even if AMGN is still very heavily weighted -- trades options. But neither my broker nor the CBOE gives strikes anywhere near the current price of 128 bucks. The lowest available strike for calls or puts is $150. Unsurprisingly, open interest is small and volume is almost nil. What in hell are the market makers thinking? Surely there's a market for these at strikes near the actual price. I ask because this would be a plausible hedging vehicle. The NASDAQ biotech index has become increasingly weighted with specialty pharmas that aren't really biotechs, so the "HOLDR"s seem to be the best hedge. But you'd have to short 'em naked (not even sure if this is possible) or deal with deep in the money, illiquid puts. Neither a good solution. Who should we write about this silliness? Another similar anomaly exists in TLRK options. The company has done brisk volume since the AMGN deal, but try doing anything with options . . . and you just throw up your hands. As an options expert, do you have any insight into this wackiness? Cheers, Tuck

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