Plan for the NEXT PLAY:
Tomorrow the stock will jump in price. Over the next few weeks, it likely will return to it's pre-good news low/volatility. So now we bet on it's price drifting downward.
This new play is independent of the previous bet that it would go up. That was dependent on the FDA decision (that went our way, B"H). This one depends on human nature - the excitement wears off, the realization that not all patients will benefit from this drug and that profits are not yet here.
So we buy a 'put' when the stock is near it's high in the next few days - maybe even first thing in the morning. (Although it's hard to get a price/purchase when the stock is moving fast.)
I want to buy a put for Aug. That give the stock 3 months to get low enough to give us a profit. But there are no Aug options listed yet. They'll probably get listed after Fri's May options expiration. I don't want to wait until Mon to do this, so I'll have to choose between July - might be too soon for the stock to get really low, and Oct - the price of the put will be higher because with options you're buying time.
Either way- don't keep the option until expiration! Sell when you have a decent profit- whenever the stock has a dip. It's a volatile stock- it will dip.
I'll probably get the Oct put. I'm buying time, but if I sell it by July or Aug I'll be able to sell some of that time to the next guy.
[When we buy a put, we obligate someone else to buy the stock at the strike price of the put.
So if a stock is $50. And we buy a July 17 put for 50 and pay a premium of $3.
If on July 17, the stock is down to 45. We sell the stock (that we don't own) for 50.
50 - 3 = 47. then we buy the stock for 45. 47 - 45 = $2 profit for each stock. x 100 stocks in each option = $200.
Of course, if the stock has a bad day, or even if it's down to 45 in the middle of June. We sell the put for more than the $3 we bought it at. In fact, the majority of options don't last all the way to expiration.]