Silicon Investor (SI) -- The First Internet Community

STOCKTALK

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 : Sepracor-Looks very promising -- Ignore unavailable to you. Want to Upgrade?

To: Thomas M. who wrote (1332)	10/28/1998 9:08:00 PM
From: Biomaven	Read Replies (1) \| Respond to of 10280

Tom, Unfortunately for this options strategy, SEPR's volatility is higher than it used to be. It's currently nearing 60%, whereas at one time it was in the 40%'s. The current price on the calls, given this volatility, is still good, though. The Black-Scholes fair value of the APR 75's is a little over $6.10 (57.6% volatility). Usually Black-Scholes undervalues the out-of-the-money distant calls, and you normally have to pay a fair premium for them over the B-S valuation. (This might of course mean that the market thinks the current volatility will trend down, which would hurt the value of the calls.) We are still only about 10% off our high, so I'm not sure I consider this as one of the heart-wrenching dips like we've had in the past. I'm encouraged that there wasn't a big (short-sighted) negative reaction to SEPR's increased spending. Naive shorts might well have pounced on a revenueless stock near its high that missed its earnings estimates by a fair bit. Like John Metcalf I believe the increased spending is actually long-term bullish, and I am pleased that the market has reacted fairly calmly. I have also wondered if there has been some weakness (particularly late Tuesday) in biotech stocks in which the Soros group holds a major stake. I don't believe any of the SEPR stake is being held in the fund that is dissolving, but there might still have been a spillover effect. Peter