精华 苦辣酸甜难书尽，成败得失笑谈中

[lazycatcat]

Thanks for sharing another bio company. I will take a look to get familiar. Bio is rather "easy" in that one doesn't have to do a lot of due delligence and can just rely on key dates of events.

I just hope you will survive in all weather to keep playing. The reason I don't like live or death bet is I am not sure if my hands will be steady at critical moments. Through many instances, I feel more comfortable at hedged betting. In bio, because change in one direction could be so skewed versus the other, such hedging makes sense I think.

DCTH has a market cap of around $450 M. If fast track is granted, raising $300 to $400 M shouldn't be a big issue. So dilution is not a concern. However, if fast track is not granted, dilution will be real. That is why I think March protection is needed.

As to the effectiveness of the cure, the claim is to prolong non development for around 200 days versus 50 days. That is quite significant given that DNDN prolongs for like 3 months. I am an ignorant on these but that is quite eventful on surface.

So, if everything is true, DCTH could fly to say $1 to $2 B valuation before FDA final approval - similar to what ITMN was trading for ...

 

[lazycatcat]

I didn't get DCTH market cap wrong. The overall market cap could be $1 B or $2 B before final FDA decision. This is just a guess of course.

My position in Bio was generally quite small. Normally in the scale of less than 50 options with total net exposure of less than $2K. I say net exposure because I generally do hedging.

For DCTH, my plan is to buy DCTH shares and also buy $11 March put options. Using Friday's closing price, potential net loss is $104 per 100 DCTH shares. In my mind, this is equivalent to buying long-term DCTH call option at $1.04 each.

Of course, due to share purchase, my position won't be large as most of my capital is tied up in selling insurance of WFC and USB. However, if DCTH does get fast track, its upside potential is pretty high based on my estimate of $1 B or $2B market cap before FDA decision.

DCTH shouldn't need to raise substantial capital before FDA. Even if it does, there shouldn't be dilution to positions built today.

I used to read 10 year worth of 10-K for companies like WFC, USB etc. In comparison, I don't think such study is warranted for bio since I won't get much insight. I went through PFE, NVX, Merk, Glaxo before and ended up buying pharma index. There was no way for me to know how their drugs would work.

So, the work on bio for me is to roughly go through the significance of drugs/cure and then focus on key events....

 

[lazycatcat]

Thanks for sharing and I wish DCTH etc work out for you. Market currently has no expectation on DCTH. We will see if it is right or wrong. I think Market is normally wrong in bio. A case in point is ITMN rising from 13 to 37. Another one is ARNA, VVUS etc.

Buying DCTH shares with put protection enable next step of play. I think this is better than March 12 call. On the downside, March 12 call is a bit better ...

 

[Aldan]

Just came across this and will likely take a position. Anybody from Fuzhou and knows about this co please discuss. Thank you!

Just be careful with this one.

I am having a not-so-pleasant experience with CEU right now-I think I have got in too quickly when it dropped substantially last Nov, as it latter got crushed due to fraud accusations from multiple firms. I have since decided not to touch any companies based in China, no matter how good their financial numbers look.

 

[Aldan]

Thanks a million for the caution! I was actually thinking about buying March puts, equivalent to shorting the stock. But the volatility is sky-high and the premia so unthinkable that any directional error will amount to a complete wipeout, which I can't afford at the moment. A strangle is not viable either as calls are also very expensive. ER is due out next week. A cooked book will wipe out shorts in a heart beat and this may become a VW! I am biased towards the bear story but no real handle at all. Wish I had gone home for the New Year and talked to local folks. I am also at the stage of capital preservation for my targetted big play. My calls to Fuzhou were not answered. Not sure what to do but most likely, I will simply let this pass. I may gamble a few K but this surely won't be my big play.

You are quite welcome, and I am glad to be of any help. CCME turned up recently when I was checking out on CEU, and they may share a similar fate. There are however Chinese companies which recoverred nicely after the attacks, but I would have
rather avoided this kind of situration, if I had known what were to come. I don't think we can apply the same rules/thinkings
when playing Chinese stocks or options. Oh, well, a lesson learned.

 

[lazycatcat]

Delcath Systems [DCTH 10.52 -0.23 (-2.14%) ]: Cramer likes this health care company and recommends buying shares at current levels.

 

[lazycatcat]

Cramer has quick wits and information. As long as one has his/her own judgment, Cramer's show is rather entertaining and sometimes insightful.

CNBC folks have a lot of connections and influences. One just need to have judgments.

DCTH option is traded at puzzling prices. March options don't have much premium. We will see what turns out eventually.

 

[lazycatcat]

I am surprised that you lightened up today.... Just kidding.

Personally, I think using March $10 or $11 to protect probably makes more sense. As I said, one reason I was reluctant to make large directional bet was I couldn't keep my hands steady.

Sometimes, sharp market rise is not a good thing. Like today's rise of x.to and recent rise of CND bank preferred. By the way, I think it is a big mistake for x.to to merge with London stock exchange. I don't think what x.to is thinking. Being purchased with no premium and giving up such a strong franchise !

Back to DCTH, another bet is buying shares and $12 March puts. Option pricing for bio is always strange. We will see what turns out to be the results.

 

[lazycatcat]

I don't understand being net short on DCTH. Shorting ITMN makes more sense I guess.

Positioning of DCTH should be limiting downside with expectation of huge upside. If NDA is granted, I guess the shares could go up to $20 with high probability. Of course, this is just based on market sentiment I observed for ITMN, DNDN and ARNA etc.

Of course, I only do hedged or limited betting in this area. One idea is to buy DCTH shares, buy March $12 puts and sell June $16 calls. Things like that ... Or without selling June $16 call

One area to play in bio is to bet no events before certain date etc ...

In any case, I hope DCTH work out good for us (albeit much smaller position I am holding). Maybe buying March $12 calls with $11 or $10 puts is a good idea. Not on 1:1 ratio but some mixed 1:1/3 etc

If more data is required etc, DCTH will go down sharply. This probability is not deemed high based on put option pricing.

 

[lazycatcat]

Thanks for the warning and sharing of previous experiences.

I agree that bio is very unpredictable - and Mr. Market too. However, the focus is probably on positioning rather than market reaction. Frankly speaking, I am rather puzzled by DCTH's option price. It is not upward or downward. Rather, it is the predicted volatility of DCTH in March that is puzzling.

Option price essentially says volatility will be less than 10% when FDA announces NDA decision. Limited upside is probably understandable in that NDA doesn't count much (an assumption of course). However, the downside is also limited. This implies market doesn't think FDA will outright reject DCTH. However, that is still possible.

It will be interesting to see what happens in next few weeks or so.

 

[lazycatcat]

I probably didn't make myself clear. I try to ignore market reaction to DCTH etc and only focusing on option positioning.

Key point is market probably under-estimated volatility of DCTH before end of March. So, if one buys 2 March $12 calls and 1 March $10 put, one may be well positioned for sharp upward move and yet protected for large loss. Just an example of course.

I think your DNDN play etc was very smart. However, such large position always needed protection, in my opinion. It is very difficult to face an incoming train, real or imagined. The pysch impact is just too big. Hedging makes it easier.

Of course, DCTH may turn out to be not volatile at all in March and thus both long and short positions are lost .......

 

[lazycatcat]

There is a reasonably high possibility that FDA may announce DCTH decision next Friday, which is an option expiry date. Hedged betting with a bias upward is probably interesting. I think $12 call shall be pretty cheap into the week.

Just an idea.

 

[lazycatcat]

Thanks for the information. So it could 74 days ? Any action close to this Friday is pending on pricing of say $12 calls and $11 puts.

This is a suicidal play like using a rotten plane loaded with explosive to sink a big ship. So, the condition is that the options must be very cheap - no more than $5 cents per contract.

The expectation is that the share will rise or fall sharply after the decision. If no decision, then all will be lost.

So, the bottom line is: Kamakazi play; large position with limited loss.

 

[lazycatcat]

Just a wild guess. If no decision by Friday, the share shall plunge a bit but probably not a lot. This shall provide chances to place March call for betting on a positive response.

There is no question that DCTH is a casino play at this point. The key is to decide on which direction to profit from and which direction to place guard. It all depends on pricing I think.

The core is to position so that eventual outcome is either good profit or limited loss. Any directional bet with large exposure is too risky and I personally won't do in any case.

That is why I think March option is the best place to put bets.

1. If FDA rejects, one probably can recoup some loss on calls with puts.
2. If FDA approves, calls will do good but not clear on how good.
3. However, one could change March calls into shares or just close the positions.
4. If into shares, one can profit further by selling covered calls before final FDA decision.

In any case, the assumption is that DCTH will be volatile with FDA decision. If this is true, it will become interesting either way.

 

[lazycatcat]

S&P500 is closing in on gold per ounce. Back in late 70's and early 80's, gold passed DOW with a big margin. Now, DOW has almost 10x lead over gold.

It will interesting too see what happens in next two decades between gold and S&P 500.

I can never understand why gold, with no practical value, is regarded as a common currency by some people.

Inflation is just a way to re-distribute wealth and is often offset by human creativity. It is impossible to rebase currency on gold as it will give too much power to gold holders and greatly hamper innovation.

Imagine if sun light is eventually harvested, where will inflation come from in major countries ?