Stocks

[Realshlomo]

True but I’d rather have 80% of my money holding a stock that I know nothing about than my expiring worthless call. Either way it’s all about your confidence and risk appetite.

For this example you would rather own 100 shares $2,200 instead of a $110 risk to buy a call?

If it dropped 20% you would lose $440 if you wanted to sell to get your cash back.

Your point of needing more time is valid. Understood.

[aygart]

No 'try again' waiting for the stock to rise. 

Some would consider that a feature not a flaw.

[MiInvstr]

For this example you would rather own 100 shares $2,200 instead of a $110 risk to buy a call?

If it dropped 20% you would lose $440 if you wanted to sell to get your cash back.

Your point of needing more time is valid. Understood.

Which call was at 1.10? And how much did it gain?
12/15 $20C closed at 3.10 yesterday and the mark is 4.90 at today’s close. To make $180 you didn’t need $2200 you needed a little over $1,000. Cmiiw.

[Realshlomo]

Which call was at 1.10? And how much did it gain?
12/15 $20C closed at 3.10 yesterday and the mark is 4.90 at today’s close. To make $180 you didn’t need $2200 you needed a little over $1,000. Cmiiw.

$25 call.

$2,200 was to buy equivalent of 100 shares but it looks like you didn't need to own that many to get the same earnings of a $20 call.

I'm definitely not proficient in options, so this is a learning experience.

[Just A Jew]

Which call was at 1.10? And how much did it gain?
12/15 $20C closed at 3.10 yesterday and the mark is 4.90 at today’s close. To make $180 you didn’t need $2200 you needed a little over $1,000. Cmiiw.

$30 call 12/15 was $.20 and went as high as $1.00. With the right timing, the same $100 used to make $25 on shares, you would have made $400 with the options.

[Realshlomo]

$30 call 12/15 was $.20 and went as high as $1.00. With the right timing, the same $100 used to make $25 on shares, you would have made $400 with the options.

On a deal like this how do you decide which strike price to buy? Do you buy in the money, $25 or $30? What's the cheshbon?

[Just A Jew]

On a deal like this how do you decide which strike price to buy? Do you buy in the money, $25 or $30? What's the cheshbon?

**I'm not an expert at all. I don't give advice. My track record is very thin, and not amazing.**

That said, you asked for my cheshbon, so here's my personal, non-professional cheshbon:
I usually don't buy in money, especially for something which has potential to jump overnight on news. I look for relatively cheap options which will increase the most percentage-wise (ex. a $.20 option jumping to $.30 on news is a 50% return). I try not to be too far out of the money to increase the chance of movement on news. Too far out, and it may not have enough demand and I may get stuck with worthless options.

[MiInvstr]

$30 call 12/15 was $.20 and went as high as $1.00. With the right timing, the same $100 used to make $25 on shares, you would have made $400 with the options.

I was going with the price at yesterdays close vs todays close. Yesterday’s close in the $30c was .75 and today it closed at .35 so you would be deep in the red if you didn’t get good timing.

[Just A Jew]

I was going with the price at yesterdays close vs todays close. Yesterday’s close in the $30c was .75 and today it closed at .35 so you would be deep in the red if you didn’t get good timing.

Timing is everything, and you picked the worst times. Mere hours before news is scheduled to break is high volatility and high cost. Close of business after news breaks is low volatility, and an expiring option to boot. Getting in to a deal like this the week before and selling within hours of news (assuming the news goes your way) is a more realistic and fair way to analyze this.

[MiInvstr]

Timing is everything, and you picked the worst times. Mere hours before news is scheduled to break is high volatility and high cost. Close of business after news breaks is low volatility, and an expiring option to boot. Getting in to a deal like this the week before and selling within hours of news (assuming the news goes your way) is a more realistic and fair way to analyze this.

Okay fair enough, but my point was you have to be much more on target with the timing and know much more about the action that will be caused by an approval when you’re trading options. As opposed to trading stocks, all you need to assume is that the price will go up with an approval and you have yourself a net positive return on approval.
Yes you can get way more outsized gains by trading options, but if you’re going in blindly it’s a way safer play to go in with stocks imho.

[MiInvstr]

Timing is everything, and you picked the worst times. Mere hours before news is scheduled to break is high volatility and high cost. Close of business after news breaks is low volatility, and an expiring option to boot. Getting in to a deal like this the week before and selling within hours of news (assuming the news goes your way) is a more realistic and fair way to analyze this.

Timing was not everything with the stock price. If you bought before the approval you were up after the approval. With options it was not the case for all options.

[Just A Jew]

Timing was not everything with the stock price. If you bought before the approval you were up after the approval. With options it was not the case for all options.

If you bought stock in the beginning of the month waiting on news, you lost money, even with the approval. Timing is everything. Options are much riskier, and that risk also brings much greater potential.

[MiInvstr]

If you bought stock in the beginning of the month waiting on news, you lost money, even with the approval. Timing is everything. Options are much riskier, and that risk also brings much greater potential.

And if you would have bought an option a month ago you would have lost your pants. I was referring to a short time before approval vs today. Not a month ago or the 52 week high obviously.

[Just A Jew]

And if you would have bought an option a month ago you would have lost your pants. I was referring to a short time before approval vs today. Not a month ago or the 52 week high obviously.

Again, you're just reinforcing that timing is everything. Saying "a short time before approval" but picking the highest point hours before the announcement, and then marking it against the lowest point after approval isn't exactly fair. At least use the 24 hour period from after it was posted here as your starting point, a week before news.

Regardless, the points all remain the same. Stocks are safer, and options are riskier. The greater the risk, the greater the potential reward (or loss). Personally, anytime I'm playing with biotech approvals, I'm looking at the whole venture as high risk and assess accordingly. Making high risk plays like biotech approvals and then playing safe by staying away from options doesn't balance in my personal risk assessment and strategy.

[MiInvstr]

Again, you're just reinforcing that timing is everything. Saying "a short time before approval" but picking the highest point hours before the announcement, and then marking it against the lowest point after approval isn't exactly fair. At least use the 24 hour period from after it was posted here as your starting point, a week before news.

Regardless, the points all remain the same. Stocks are safer, and options are riskier. The greater the risk, the greater the potential reward (or loss). Personally, anytime I'm playing with biotech approvals, I'm looking at the whole venture as high risk and assess accordingly. Making high risk plays like biotech approvals and then playing safe by staying away from options doesn't balance in my personal risk assessment and strategy.

My point is, there’s a lot more that goes into options pricing than just approval or not. (With stocks too, but it’s a whole different ballgame with options). And to just say that the play is to go with options over stocks is not always true.

Obviously timing is everything with stocks. But options is way more magnified, and timing can make a much larger difference when that timing would not have affected you if you would have entered with stocks.
And from my experience, whatever you need to know to win with a stock you need to know much more to win with options.

[gozalim]

Yes, unlike stock, with options your entire purchase is at risk, and your need to lower your investment amount accordingly (relative to how much you'd pour into stock).
That said, your lower investment amount has win potential comparable to the higher stock amount.

In general, these cases that have a specific move expected at a specific time, are one of the better use cases for maximizing simple options. Especially if you're aware early enough while the information is relatively obscure to the rest of the market (I won't say inside).
Obviously assuming the price is right; slightly out-the-money calls, with generous expiration, with low relative contract price...

Some caveats: one of these first ones, FDA postponed the final verdict, and my short-expiration options were worthless. Hence the need to pay a bit more for later expiration.

Also, if biggest gains are pre market, I think options are not as able to capture that...

[Realshlomo]

For the option guys:
Now that it popped to $27.50 is it a move to buy a $20 put expiring Jan 19th for $30?

Do we think it will go back to the low it was before this approval?

In the past it was always recommended to sell the stocks right away to catch the gains, with that in mind can we catch some more gains riding it back down?

[Just A Jew]

For the option guys:
Now that it popped to $27.50 is it a move to buy a $20 put expiring Jan 19th for $30?

Do we think it will go back to the low it was before this approval?

In the past it was always recommended to sell the stocks right away to catch the gains, with that in mind can we catch some more gains riding it back down?

Why are you investing in this company?

[Realshlomo]

Why are you investing in this company?

Based on a tip on the forums.

[Just A Jew]

Based on a tip on the forums.

The tip was that news was coming out which would alter the stock price. Now that the news has already come out, the tip is irrelevant. Any investment going forward should be based on what your research tells you will happen with this company over the time frame you're looking at.