Replies to post #103468 on Biotech Values

[Rocky3]

I am trying to do the opposite with March 20 and 25 calls.

I did a "ratio spread" back in September. Sold March 25 calls to finance the purchace of March 20 calls. I paid a little money, but basicly established a significant long bet that MNTA would be over 20 in March at very little cost - far less than the $2/sh that the 20 calls cost at the time.

Due to the time decay in valuations of the options, the 25 calls have fallen more than the 20 calls on a percentage basis. I am now reversing the process by selling the 20s and buying the 25s. The net is that I have some "free" 20 calls. I still think that MNTA will be over 20 in March, and I am lowering my risk that it will be over 30 (where the trade starts to lose money - at least in the sense that my upside on my long shares is then capped).

The spreads of the bid/ask on the options are extreme. You have to be a little lucky to get a price in the middle. If you are dealing small numbers it is possible. In some other stocks, it is much easier (like AAPL). But nothing has the same implied volatility as MNTA (at least over a long period - like 5 years).