Biotech Values

[tinkershaw]

It looks like the pessimistic player initiated a debit put spread, buying 2,000 lots at the January 2011 $12.5 strike for a premium of $0.45 each,

That is only a $90,000 position. Hardly the size of some in the know institutional position or anyone likely to have any special knowledge.

The problem with options is their volume. It is too low to do much with once you get much beyond a 5 figure position. You have to start buying up all the strike prices to start putting money to work due to lack of volume and liquidity. I've bought up 100% of the volume on certain days on the rare occasions I buy options, and I have no special knowledge or information. But I'm sure some web site may have made a comment about me, given the bullishness that is exhibited when I do utilize an option. Never short-term like that though.

All in all, menas absolutely nothing. It is another interesting way to invest in stock however. Biotechs create a lot of these type of opportunities since they often have binary events, and such wildly differing valuation opinions that move on these binary events.

Tinker