精华 苦辣酸甜难书尽，成败得失笑谈中

[lazycatcat]

A bit itchy on ITMN April $15 put buy. If Europe doesn't approve the drug, ITMN will be in a tail-spin.

Are you familiar with European process ? Even though the process might be a loose, why not wait for 1 year for the new PIII results ? It shouldn't be a big deal just to wait ...

 

[Aldan]

Best of lucks to you too! AA reported a good Q but lost some in AH trading --- this signifies to me that Mr. Market has started moving into a correction mode, more to be confirmed by other bellwether reporting in the days ahead. I am calling for a 5-8% correction as I have indicated a bit earlier, which is healthy as far as the longer-term is concerned.

you have so correctly predicted it.

 

[加京游子]

you have so correctly predicted it.

Sadly, I can't take any comfort in this whatsoever as I failed to hedge against my long positions. As most small biotechs have been suffering big declines the last couple of days, my brokerage account takes very bloody hits. Worse yet, I can't buy any more as I have used up my dry powder.

 

[Aldan]

Sadly, I can't take any comfort in this whatsoever as I failed to hedge against my long positions. As most small biotechs have been suffering big declines the last couple of days, my brokerage account takes very bloody hits. Worse yet, I can't buy any more as I have used up my dry powder.

I am sorry to hear about this, but I hope the drop in small biotechs is only temporary.

 

[lazycatcat]

Sorry to learn about the loss, Jia.

Personally, I think option is used to bet on tail risk of a situation. The risk is remote and thus the option is sold very cheap for a few cents. Or the options are not priced properly in comparison with the risks.

For instance, ITMN has a tail risk of not getting approval in Europe. It April $17.50 put is sold for around $0.50. A combination of non approval from Europe and harsh requirements by FDA on PIII trial shall send the share below $10.

You know better about the process and probably can form a better opinion if the risk is worthwhile.

ITMN can probably sustain its operation with comfortable room for about 1 year. So, the double hits shall cause concern on its financial position.

It should raise some money now and put investors on roasting. Of course, this may not be their style.

Another tail risk is June $100 option of Berkshire Hathaway (brkb). The option is being sold at around $0.10. There is a possibility that Berkshire rises to $90 - $95 range if stock market rallies in 1st half and economy remains stable.

There is $30 B cash at the end of Q3. If GE, GS and Swiss Re buy back the bonds, the cash position will grow to over $40 B to $45 B. This gives Berkshire enormous leverage to expand earning power.

Since all is about tail risk, the option could be worthless. However, the possibility is probably higher than what the option pricing implies.

 

[加京游子]

Thanks a lot Aldan and Cat!

I feel devastated myself too for the big paper losses. I had my hedge on for a while. Upon the NDA filling and the subsequent selloff, I conciously decided to ride it out by not only taking the hedge off but also using up my dry powder reserve to buy a lot of June calls. This is what happens when one decides to play a high-stake game against Mr. Market. While the paper losses are extremely hard to swallow, it is not over until it is over. Jan. options are behind us now. Let's see what shapes up going forward.

I really can't comment on the way you see options, Cat. Being non-technical, I play options upon expecting a catalyst based on DD to the best of my abilities.

 

[lazycatcat]

I am reading a book named Quants on the quantitative folks on WS. This is a really great book.

All Quants originate from Edward Thorp and his book, which is freely available: [media]http://www.economics.uci.edu/kassouf/pdfs/beatthemarket.pdf[/media]

It is a fascinating book ...

 

[挺傻]

这个主题看到一千帖了。加京游子，加油！
谢谢楼上LAZYCATCAT分享的资料。QUANT是股票分析中非常重要的一部分，现在也有很多软件帮助计算OPTION的获利情况。

 

[加京游子]

这个主题看到一千帖了。加京游子，加油！
谢谢楼上LAZYCATCAT分享的资料。QUANT是股票分析中非常重要的一部分，现在也有很多软件帮助计算OPTION的获利情况。

Thanks are due to you, 版主！The 1000th post belongs to Lazycatcat, and the 1001st to you. THANK YOU BOTH VERY MUCH!

I started the thread on July 3, 2009, in the hope of carrying it as far as possible and ultimately ending in print. But in reality, I am really not sure how much longer I can and will carry it. The game I play is not hypothetical with monopoly money but rather high-stake and real in hard-earned dollars, brutal and bloody at times. Stories are yet to unfold and options to expire. The game isn't over and I won't call it quit at the moment. I sustained the wipeout by ELN in 2005 and DNDN in 2007. I also suffered heavy losses in both 2009 and 2010 from many disastrous plays as documented in my posts. Let's see what will be unfolding in the days, months, and hopefully years to come!

It is my concious choice to pick biotech as the playground and options as the vehicle via which the game is wagered. I am fully prepared to go down for my choice as for many others I have made in life. 成也生物技术，败也生物技术。成也期权，败也期权。

Reading great book(s) is both a joy and an enjoyment, good for the mind, good for the heart, and good for the soul. Keep them coming, veryone! I am currently reading "Outliers: The story of success" by Malcolm Gladwell, completely unrelated to Mr. Market.

Yet, there are things in life that are simply innate or parents-given. Simply put in plain words, either one has them or one doens't. They can't be learnt. There are no two ways.

 

[lazycatcat]

Thanks for sharing your experiences, Jia. I learnt a great deal, especially on bio.

DCTH March $10 is trading at very low premium, given FDA decision will come before March option expiry. This is rather strange and probably means market doesn't give much to the decision ?

 

[16K]

啊啊

 

[lazycatcat]

DCTH

March $12 call is probably a good bet. CEO is taunting $15 B market and the effect of the cure seems to be very good.

Maybe NDA doesn't count as significant by investors. We will see ...

I still think ITMN may get veto'd in Europe. So, still something to play with. Timing of decision is unknown but June is a good bet.

 

[lazycatcat]

if your DCTH June position is live or death situation, March call is probably a safer play with similar size of gains but smaller size of loss. The logic is like this:

- NDA decision is likely to be end of Feb and thus enough time for Market to digest the good news till March expiration.
- Most likely reaction is moderate upwards - maybe towards $15 - due to concerns on next round of financing.
- Roll over to say Oct when decision will be out.

If NDA decision is favorable, the share probably will see a sharp decline - again due to financing. March call loss shall be smaller and thus more capital to bet again in future.

Just my thinking and may be missed something. I like to prepare such events in movie 2012. You want to survive AND profit from first wave. Then position again. Unless you can make huge profit from first wave, of course, you don't need to protection. The first wave of DCTH probably is not high enough upwards and thus caution is probably a good idea.

 

[lazycatcat]

If one wants to prepare for fast track and FDA decision, Jan 12 call at over $20 is probably worth consideration. An large position with March 9 or 10 put protection probably makes sense.

Based on DNDN and ITMN experience, Jan $20 call will explode if fast track is granted.

 

[lazycatcat]

To clarify, I mean a large position of Jan $20 call must be protected with March 9 or 10 puts. This position is probably equal to cost of June $10 position but with higher expected return yet lower risk.