#Short Vol on ATYR and underlying as well

23 messages · Page 1 of 1 (latest)

snow coyote
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Okay so essentially ATYR is a phase 3 drug company trading at 5.70 dollars (570m mcap) with a single drug focused on treating sarcoids with a novel idea of treatments. They have around 1.2 dollars per shares in cash with 1 year for runway. Long story short sarcoid has been a graveyard for drugs and ATYR MOA is hella questionable with q2 results being v questionable as well. If the trial succeeds it will go to 17ish and if it fails should be around 1.2 (cash) results are expected in the next two weeks but not guarenteed. So what's my position? I'm short vol with a small underlying short as well. My thesis is IV is way too high and theres a high chance of failure (>85%)

First with the vol side. I've sold 30% in 1 dollar october puts (20 cents a pop) Just using INMB, SAVA, CRDF as base cases where there was a fat fail and still traded above cash due to some post hoc subgroup

I've also sold a straddle on 5 dollars for 6.2 dollars total with 50% on october

lastly I took a short with 20% along with 12 dollar september calls (1 dollar) for coverage purposes.

So to go over my breakeven and percentage gains.
Max gain is at 1 by october 20th. Where I'll make 54% roughly
Loss break even is at .57 and 12 dollars ish, with 17 being a roughly 25% loss. Side note if you follow you almost have to use margin just because of the selling call/put cash requirements. LMK if u have any questions

snow coyote
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aATYR FAILED

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inm up

snow coyote
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this is alpha

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also price above 1

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barely which is max gain

mellow notch
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You don't think it's too risky for an unlimited upside risk strategy for something that had 15% chance of going against your way, by your own estimates?

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Like glad it worked out and all

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Ah wait I see it's partially covered by your $12 call

snow coyote
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read the end for my loss/gain

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I shorted vol and was hedged asw

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yeah like you said

mellow notch
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I played the run-up to it with a combination of calls and shares. Closed all my calls, sold some covered calls on half my holdings. End result stings but I'm still net green.

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I think I'd still be nervous with a breakeven at $12 ish on a pharma stock.

snow coyote
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hmm?

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i was very confident in failure

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and was hedged properly

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even on the off chance I was wrong my loss was capped

mellow notch
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Doesn't sound capped if your $12 long is only "20%" and your straddle is "50%" - not sure what the percentages mean, buying power devoted to this position?

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hard to tell without specifics but congrats

snow coyote
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I had about 3 mil/4 mil devoted to this

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Yeah straddle max loss is 50% even in success it woulda been 17 tops when i cover and i had my sold 1 puts asw