Ariad Pharmaceuticals Inc fka ARIA

[SyndicateTwo]

Well, here's two perfect examples --

OREX -- $4.82 Friday close, the DEC $4 call BID at $1.70 with TWO weeks left.

http://finance.yahoo.com/q/op?s=OREX&m=2010-12

Why? Some diet pill thing. I don't follow it that close, but it makes my point in relation to why ARIA's options are not expensive considering a potential event. You see what I'm talking about? No market maker is going to bid a call option with two weeks left almost 30% over intrinsic without a reason.


Another is MNKD -- $6.34. The Jan $6 is bid $1.53. Hell, the $7 is bid $1! Again, an expected event in Jan.

http://finance.yahoo.com/q/op?s=MNKD&m=2011-01

The main reason for both is that market makers try to make doing a straddle meet the expected volitility on the news. So, buying the call and put together at the money should cost you what the stock will move in either direction. With FDA announcements, you really don't know and thus the need for a straddle over a directional play. You pick one direction over the other and win, you hit a lotto ticket. But we all know that's a rare event.

These two examples are why I am wondering if you're a bit too excited about ARIA's near future because money talks. Forget charts. Just look at how the options are priced in any stock and you'll have all you need to know typically.

Hey, I even have another -- ISPH. Friday's close $7 with the Jan $7.50s bid $1.15.

ARIA's are pennies. In other words, no one thinks much of the stock action anytime soon.