Time for options w/upcoming PDUFA date?Which June call should I buy?
For fun I ran the numbers assuming a $12,000 investment w/commissions ignored, and here's what I got*:
--------------------------------------------------
1) Strike $7.50, cost $1.20 per contract = 100 contracts (or 10K shares)
2) Strike $10.00, cost $0.70/c = 171 calls (17.1K shares)
3) Strike $17.50, cost $0.15/c = 800 calls (80K shares)
Product gets approved and stock price jumps to the following:
$15, Result:
1) Gain = ($15 - $8.70) x 10K = $63K
2) Gain = ($15 - $10.70) x 17.1K = $73.5K
3) Gain = ($12,000)
$20, Result:
1) Gain = ($20 - $8.70) x 10K = $113K
2) Gain = ($20 - $10.70) x 17.1K = $159K
3) Gain = ($20 - $17.65) x 80K = $188K
$25, Result:
1) Gain = ($25 - $8.70) x 10K = $163K
2) Gain = ($25 - $10.70) x 17.1K = $244.5K
3) Gain = ($25 - $17.65) x 80K = $588K
* based on most recent sales (Yahoo!)
--------------------------------------------------
I guess it all boils down to how high one believes the stock will jump by the expiry date.
Of course, there's always the $7.50 straddle in case one's worried about a CRL! ;)
Cheers and good luck!
JJ