Biotech Values

[Jonathan Robinson]

On B/S for biotech options - I do not disagree with your assessment as B/S clearly misses fat tails and extreme events. On CEGE, it should be relatively close however given the fact that the option being priced is only 2/3 of a year longer than the longest public security and we are using the inputs derived from that security to price the new one. Hence, you are effectively extrapolating from the one to the other over a relatively short time period - not too huge a leap of faith.

On DNDN, I have not followed it closely enough to comment.

I do find it interesting the synthetic short is fairly close to stock price - buying the put and selling the call - which is strange for a supposedly shorted out stock. Go look at NRMX recently - it cost you $1 to replicate a short using options.

Jon