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These market makers drug this stock all the way down to the 200 MA sub $2.90 on low volume. They sucked the retails dry. Then they drifted it up to $3.50 on low volume and sucked them back in. Now they dumped the whole boatload on a waiting buyer @ 3.50. They sold the August 3.50 calls and bought the JAN 12 3.00 calls. That's why it got pegged at $3.49.
The buyer @ $3.50 was on the other side of the option sale. They are also on the other side of the JAN 12's @ 3.00 buy.
Just my opinion of course.
My honest opinion is that the stock will continue to tank along with the overall market. Unless some news or what have you. Now if you want an interesting stategy then plug this into your calculator.
First you must be willing to buy shares at around $1.65.
Sell 10 Jan 12 3.00 puts @ 1.35. Buy 10 Aug 2.50 puts @ .20
Reasoning, the market sucks so we could see sub $2.00. The August puts would be worth .85 @ stock price of $1.65.
You would be put at around that price but the Aug puts would offset some of the price. Net 1000 shares at an armageddon price of about $1.00
Selling 10 Jan 12's and buying the Aug nets +1150.
However your margin requirement would be about $1850.
Interesting enough. I haven't guessed upon the timeline of events so the August puts could be substituted with later months.
If my logic is crazy please correct me. If you have other ideas please pass them along
Selling a call now is not the best because of the low volatility. The covered call is conservative and a great trade but you know the remorse that sets in when a news item comes out as you watch your shares disappear. The stock is so cheap now you might as well hold and wait for the next run. Resistance up in the 4's with support at around 2. If I am not mistaken I think FMR was starting to buy around $2.20 in Feb. I could be wrong but I am just looking at a yearly chart.
Implied volatility is quite low right now as compared to recent history. The Nov. 2.5's have a theoretical value of .682 and a delta of .6774. The Aug 3's have a theo of .247 and a delta of .4519. In other words, the options are priced fairly and could be considered a good buy. To sell options at this point is not good because of the low volatility. You need high volatility to sell.
I would go for the high delta in the money calls and sell calls against my position in a rally. I am looking at adding more Jan 12 2's if I can get them under $1.40. That gives me 18 months to be right. Trying to get filled at your price has always been tricky with Aria. The option makers are definitely out to nickel and dime you.
Be careful and do not try to buy into the ask. I always try to middle them or time a morning downdraft.
Dear board,
I am an investor who is quite bullish on the prospects of ARIA. I have increased my bullish option positions as of today. What I really need to know is what is the forecasted " burn rate" WITH AND WITHOUT great RIDA results.
Now you can claim that I am a short, but I am longterm long who will short my position if need be.
I mitigate risk in my own way and I will stay long . But I guarantee I will roll over my long when the 2013 Leaps come on board in September.
Now I have my own assumptions in my brain but I guess what I need is an unbiased opinion other than my own.
Thanks
New link:
http://bledsoebattle.blogspot.com/search/label/Ariad
That one implies this fall.
Interesting blog if the link works:
http://bledsoebattle.blogspot.com/2010/06/outperforming-expectations.html
Pretty much implies that Ariad is recruiting
Yes the trial can be registered by August, but the 200 day MA can be hit as early as tommorow or never be hit at all. The 200 MA is a buying point of mine not by August as the put buyer believes the stock will be.
Obviously that put buyer will be selling his options if the stock got to the 200 day because they will be up over 100% and would know that buyers may step in.
Now maybe that buyer is stupid or something but he may be taking into account that there might no news by August . 5938 contracts X $30 = $178140. Maybe they are stupid or maybe they are smart but Murphy's Law does state "Anything that can go wrong, will go wrong".
That applies to both sides however.
Thank you for listening to my rant.
Here are a couple of facts. Biotechs are out of favor. The chart and the price action of Aria stinks. The 200 day MA is below 3 and there was some large put buying at the ask on the Augusts 3's. Wait for the 200 day MA to get close and that will be your buying point.
Patience is key now.
Don, even though the company may have enough cash to last thru the better half of next year, the perfect scenario would be if the RIDA analysis came positive. Of Course the stock would rise and then the company would be able to go the market and sell equity. Even though there would be dilution, 10 million shares @ $7.00 would pretty much cover AP534 without much partnering.
Even though we think that AP534 is the key to the future, I think that RIDA's analysis is key to the future of the Ap534 and its timeliness to market.
Funny you said that. I ran some covered calls a few days ago . Sitting at $3.01 with a %14 premium in August. Still holding the $2 and $3 strike for Jan 2012. Waiting on September for the 2013 Leaps to begin. Cant wait ! Easy money.
If Aria is a large portion of your portfolio, you should be selling some. We all know the prudent investor diversification crap, but if you can trade options, I would consider selling some calls on a portion of your position. Earn a tiny bit of income for waiting. Look at the potential timeline of events and pick your spot. Volatility is low right now but I would go after the Nov $4's for .70 or above if the stock ticks up a bit.
If there is a news event soon then I would be selling calls at the Nov $7.50 strike on the 3rd day of the event. If you get taken out at $7.50 by Nov. then you are "genius".
If you can't trade options then I would be selling equal amounts all the way up at .50 increments.
Yea I know it is tough but there is always a pullback no matter how confident you may feel about an investment.
Good luck !
Don you had stated "I'm hoping that an SPA and Phase 3 trial approval for AP534 will be forthcoming"
Although going from a Phase 1 safety study with about 80 patients to a full blown phase 3 is not unprecedented, I find it hard to believe that Aria would have the political clout to persuade the FDA to go directly to a phase 3 pivotal. If it were to happen it would have to be a huge trial and how long would it take to recruit probably 800+ patients ?
Of course this is only my opinion and I really hope you are right !
From the Clinicaltrials.gov website:
What are the phases of clinical trials?
Clinical trials are conducted in phases. The trials at each phase have a different purpose and help scientists answer different questions:
In Phase I trials, researchers test an experimental drug or treatment in a small group of people (20-80) for the first time to evaluate its safety, determine a safe dosage range, and identify side effects.
In Phase II trials, the experimental study drug or treatment is given to a larger group of people (100-300) to see if it is effective and to further evaluate its safety.
In Phase III trials, the experimental study drug or treatment is given to large groups of people (1,000-3,000) to confirm its effectiveness, monitor side effects, compare it to commonly used treatments, and collect information that will allow the experimental drug or treatment to be used safely.
In Phase IV trials, post marketing studies delineate additional information including the drug's risks, benefits, and optimal use.
Obviously you dont how much it costs for ongoing trials just as much as I dont. But answer this question ?
How much money do you think it takes to develop a drug and to fund all clinical trials until the drug reaches approval ?
Can you answer that question ?
I can't but I can use my Las Vegas gambling instinct to suggest that it will be well over $100 million.
Now I am not implying that ARIA cannot do it as you seem to think that I do, but I do know the hazards of biotech investing and advancing drugs thru trials is a money pit. It is the biggest drain on a balance sheet plain and simple. If you dont have the cash then trial will not be large enough or will not be as specific as you would like.
A quote from a prees release regarding RIDA:
"Merck has spent more than $200 million on the partnership so far, including about $128.5 million in milestone payments. Last year, the companies canceled one late-stage trial and delayed another. That cost Ariad millions in milestone payments."
Now let me ask the question again
How much money do you think it takes to develop a drug and to fund all clinical trials until the drug reaches approval ?
As matter of disclosure I own ARIA options and I would recommend buying at these levels.
Remember that when you and Surf start picking at my posts
Hello there. Responding to your post, I used a ? in reference to "if anyone remembered what happened to Medarex" ? Meaning that this situation is somewhat similar to that but not exact.
To say that only 1 out of every 50 smallcap biotechs will be bought out basically means probably 49 will likely fail or be diluted to under a $1.00. DNDN or HGSI come once in a blue moon but that story isn't finished being told.
The problem with biotechs is they have to raise hundreds of millions just to get 1 product through development so that they can proceed to develop another product.
Now back to the buyout, I am under the assumption that RIDA will go thru the first time which would give ARIA some legroom with their finances from the milestones but the royalties will be slow because it will take time to ramp up. But still, it will take $100 million plus to get 534 thru trials. To go it alone there would have to be a shortfall somewhere along the line unless the royalties come.
Now if Rida does go forward why wouldn't MRK just buy ARIA.
From a press release: "Under the new deal, Ariad won't have to cover any development costs and could get up to $514 million in milestone payments, along with royalties. "
"Ariad will get royalty payments of more than 10 percent on international sales"
Aria's market cap is 380.74M as of now. Of course it will go much higher if Rida proves succesfull.
AS a matter of disclosure I own 7 Jan 2012 calls and 10 Jan 2012 calls and I am currently have a fat paper gain as we speak.
Remember Medarex ? Medx
My memory may be hazy about this but I remmember Medarex partnering with BMY for their melanoma drug ipilimuab or however you spell it. A few years ago MEDX ran up to $15 in anticipation for the conclusion of its phase 3 trial. After the data was released the FDA requested another trial due to safety concerns. Medx quickly sunk to $5 but its partner BMY continued on with the next trial. That is the trial the data was just released at ASCO.
Now during the course of events BMY eventually bought MEDX for $16.00 a share or 2.4 billion. They took control and magically the new melanoma drug looks to be approved. Medx could have never got that large of a trial off the ground without major help and BMY knew that but it came more cost effective just to buy the whole company considering they had a decent pipeline.
Which brings me to ARIA. There was at least a 100% in MEDX before the earlier ipilimimab study. Then the sudden destruction of wealth and then the sudden rise on the buyout. BMY had to know that the analysis of the study was good or they would have never bought them out.
Which brings us to MRK. Why would they amend the ARIA agreement in ARIA's favor knowing that ARIA could not survive without it ? MRK could have bought ARIA for $600 million no questions asked.
With MRK testing RIDA on so many indications you know that they must know something. The cost of all the RIDA trials has to be astronomical and at some point it must be more cost effective just to buy ARIA and its pipeline instead of paying out royalties.
I know the buyout is coming but I do not know at what price.
Any thoughts ?