On April 5 I find a good way to make a Bull Put: DNDN, Dendreon Corp. or the
On April 2 it starts a rumor that eventually the FDA will approve a cancer vaccine that Dendreon has developed. Also on April 2
the title makes a nice jump on rising from $ 5.22 to $ 12.93 on 147%!
In the following days there 'a retracement, so I dedicate to enter.
How? I decide to put a bull view that implied volatility is sky high.
agreed on the approach, which strike and maturity to choose?
So we see, due April, between 15 days: DNDN
Title:
Opening Date 04/05/2007
S1 Apr07 Apr07 B1
15 Put@0.7 $ 05.12 $ Put@0.3
Crete: $ 40 to position
Max Risk: 210 U.S. dollars a position
BEP inf: 14.60 USD
Max Profit / Max Risk: 19%
19% in 15 days not bad, but you can 'do better.
And here's the greed in action:
if instead of April, May you picked: 15
S1 May07 May07 B1
Put@3.5 $ 05.12 $ Put@2.3
Crete: $ 120 Location
Max Risk: $ 130 Location
BEP inf: $ 13.80
Max Profit / Max Risk: 92%
I threw myself on the second trade, of course. Ma ..
If I read correctly the rumors and news, I would agree that the FDA has not approved the drug, it is rumored that only he will.
Let's see how they went the two trade:
April:
volatility does not drop, a sign that the market expects something.
Generally the bull put the close when I reached 80% profit, and would rather not bring to an end.
However, due to the volatility are forced to wait for ... and in fact the options expire worthless, OTM, and I bring home all the prize.
May:
How birds fly above the implicit not set, but this time, alas, there 's just time to occur because what the market fears.
In fact, the 9 / 5, the FDA has announced that
need more information about this medication, and the price of Dendreon falls dangerously, any day of 64.32%, from $ 17.74 to $ 6.43 . Obviously, my bull is put to air and I spout the max risk, buying back the combo at $ 250 (difference between the two strikes - credit received)
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