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Dendreon Corp. Message Board

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  • fib1_1_2_3_5 fib1_1_2_3_5 Mar 26, 2007 5:33 AM Flag

    Happy Gambling

    "Suppose I offered you the following proposition:
    You give me $5 and I give you a coin flip.
    Heads - I hand you $25.
    Tails - I keep the $5.

    Why argue for the next 72 hours over what the FDA will do? This trade is a straight gamble, and should be approached as such.

    So, would you take the bet?"

    Unless somebody put a 2 tailed coin in play, I will bet you about 25% of my speculative cash.

    The only real questions are:

    A) How much to bet? This is a difficult question, but I believe the correct answer is a significant portion of your speculative cash. though people always adivse caution in cases such as these, it is just as bad in the long run to underplay.

    B) If you are REALLY certain of that reality follows the 2 branches listed, you can do best with straight call options. Long common plus long puts may work, but seams a little less solid. Long common plus selling calls to hedge is a loser play.

    But I am too busy to work this stuff out, so just spent my available liquidity on common and calls.

    Happy trading.

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    • Do you really "lose" 5$ here? Or do you just lose use of it for another two years and then get to play again? that's the part I don't understand about this stock-the fact that from what I have read-it is extremely unlikely that this drug will be rejected flat out. So even if you have to put 5K on ice for another year or two-their is a good chance of doubling,tripling, quadrupling your money after that time. I think it might be a good bet.

      • 1 Reply to throwtotiki
      • "Do you really "lose" 5$ here? Or do you just lose use of it for another two years and then get to play again?"

        Very good point - this may well be applicable to others on the board. It isn't applicable to me for the following:
        a) I have not been convinced that chances of approval are better than 50/50, and although I have learned a lot about biotech stocks over the last week, it isn't a sector I am confident with yet.
        b) Because of 'a', I am only willing to bet (notice no " ") a very very tiny fraction of my cash on hand on this trade.
        c) Because of 'b', the logical route for me is May out of the money calls - which by design leave me empty handed on a no vote, but could yield 1000% percent or more on an approval.

        While you may be right in that the long term could still be positive regardless of this decision, I'm looking for a trade - not an investment...I have an IRA for that.

        Unfortunately, but to no surprise, I am not the only one with this strategy in mind, and the demand for calls combined with the reluctance of market makers to write them has inflated prices (implied volatility is somewhere around 250%). Even so, it is still the wise choice, I think, for us biotech neophytes chasing dollars to go the options route.

 
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