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Non-Tech : Paired Trades and Hedging Strategies
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To: Sam Citron who wrote (27)11/16/2004 5:06:53 PM
From: Biomaven  Read Replies (2) of 136
 
Sam,

The AMD/INTC trade has indeed worked out better than I could have hoped. I'm keeping it in place for now. With Intel still at 20X AMD's market cap, there's still room to move.

In your biotech example, both the puts and calls are very expensive. Thus I don't think you are going to get rich playing options unless you have a good idea on the outcome of the trial. Where the implied volatility is not so extreme, sometimes a straddle or strangle can be a good play.

Mostly biotechs tend not to creep up in anticipation of results unless there has been a leak.

There are indeed some sites that track unusual options activity. I also can't recall specific names though. It's noteworthy that MRK puts soared just before the Vioxx news.

Ivolatility.com does track unusually high implied volatilities if I recall correctly - I haven't looked in a while, and the site has changed.

Peter
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