Monday, March 15, 2010

** UPDATE: ALKS - FDA Decision Out


Read the first blog: CLICK HERE .

ALKS is trading 13.50 up 1.29 or 10.6%. The IV30™ is down 44%. The LIVEVOL™ Pro Summary is below.

The news is considered good. The FDA requested information - but it seems to be about labelling. They have not requested any more trial data. The news snapshot is included (click to enlarge).

The Options Tab snapshot is included (click to enlarge).

Recall the trade from the last blog:
Sell Apr 10 puts @ $0.45
Buy Apr 12.5/15 call spread for $0.85 ($1.30 and $0.45)

Now the puts have fair value: $0.10.
The Call spread has fair value: $0.85

So the two day PnL looks like this:
3500 * 100 *{ ($0.45 - $0.10)+ ($0.85-$0.85)} = $122,500

Note that the call spread didn't change in value even though the stock went up significantly. This is the effect of vol coming down so hard. This trade won because of the put sale. This is a good lesson in event vol - picking the right direction does not necessarily mean winning to a trade unless you sell some vol too.

Finally the Skew Tab snap for Thursday and today are inlcuded (click either to enlarge).

Skew Legend:
Red - Front month
Yellow - Second month
Green - Third month
Blue - Fourth month

You can see how the back months have turned back into "normal" skews from the flatish pattern they displayed prior. To read why and what "normal" skew is, you can click here .

Note the front month is now just a red dot - there is only one OTM strike that's bid.

This is trade analysis, not a recommendation.

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