Thinking longer term I bought a call vertical today. I bought the August 2.5 calls for $6.65 and sold the August $15 strike calls for $2.60. Therefore my cost to own the stock is $4.05 plus $2.50. I looked at a put vertical and likely made a mistake. My mantra is - if it is a slow mover then sell a credit put vertical collecting premium. I bought a call vertical and there is time decay associated with this move. In a put vertical the premium erodes in my favor. I would have done the put vertical for less than 45 days.If you were to listen to someone on CNBC Tony Zhang etc, state that they will be in the option for a few weeks to see what happens the reason to do that is to avoid the time decay in the last 45 days of the contract when buying calls. The bottom contract here with the positive information on the progress made (the trial was allowed to move forward) is good, but trials take time and money. It is not a fast process. Likely I should have sold a $7 strike and bought a $5 put for a gain of $1. Gain $1 or lose $1 is a fair return for a slow mover. I anticipate this moving slowly now that the news is out until the next update on the human trial process.
And so it goes. If the Reddit StockTwits Robinhood 100 fast movers crowd gets involved perhaps it moves sooner rather than later. I am not hopeful and think news on the human trial progress will move the stock next time.
I spend $4.05 to catch all of the move between $2.50 and $15. therefore I am ok if I call the stock to me and it is above $6.65. Somewhere someone is smiling having collected $4.05 today from me and hoping the stock is below $2.50 per share at expiration. I will not be in the contracts then.
I will stop loss this at a 25% loss and exit.
I used 2% of account size for this initial position.
How does this play out?
Who can say.
Sometimes I am very right, Sometimes very wrong.
all the best.
see above for how I did this but here is my thought.
For each 100 shares you own you can sell the August 15 strike put at the mid for $2.45. This reduces your cost to $9.45.
in the last 45 days the $9 strike will begin to erode quickly. If you like the company you will be able to buy the contracts back and roll to the next month and exit.
Sometimes it is just best to sell if you do not like the company's prospects.
A longer term position ties the shareholder of a drug delvelopment stage company to a binary event. the outcome is good and it is a home run. The outcome is bad and the desks, chairs and proprietary data is in the hands of the bankruptcy court.
I will be in this for a quick rise at a minimum cost and out in very short order with a 1% of portfolio assets loss. In the alternative the shares will spike and I will exit with a gain.
I will not be around in any meaningful fasion for the next press release relative to FDA type progress on the drug development.
Mostly it is wise to stick to IBB and sell in this market a put vertical.
I have sort of talked myself out of this position and may exit earlier than planned - but I always have a plan. How much I will lose and where I will harvest potential gains.
but always first a plan for what loss I will take.
all the best.
If I thought the stock own will not rise I ladder across to a different company. That is, I find another $8 stock that I like. I sell the old and buy the same number of shares of the new company. I think of it like two ladders against a building and I cross over from one to the other at the same price (rung on the ladder).
that really is all I've good.
all the best.