Two new put candidates
September 29, 2010
– Comments (18) |
RELATED TICKERS: CORT
, ONCY
Corcept (CORT) - I'll try and be concise here. Corcept is expecting topline results from the phase III trial of wonder drug Corlux in Cushing's syndrome in December. Corlux is a wonder drug because it has single-handedly kept Corcept's share price afloat for years despite a complete and utter lack of success in late stage trials. Corlux has failed three phase III trials for psychotic depression which has not stopped the company from attempting to enroll a fourth phase III trial (still enrolling 2.5 years later). Corlux was then advanced for mitigation of antipsychotic-induced weight gain but proof-of-concept data was unimpressive. So Cushing's is the latest in a series of indications for the company's solitary compound in advanced development. Corcept has been diluting heavily this year indicating to me a lack of confidence in their phase III results. The share price is up nearly 50% over the last month despite an absence of positive catalysts, which is suggestive of a Bottle Imp pattern developing. According to Yahoo Finance, there are no puts currently available with an expiration in 2011 but I will be watching for these closely as I believe the likelihood of positive results in Decmber is less than 30%. Negative results should drop the market cap close to cash, from above a share price of 4 to well below 1.
Questions for the options experts - if no puts are shown on Yahoo Finance, does it mean for sure none are available? How do options markets develop when none currently exist? Is selling naked calls a reasonable alternative to buying puts?
Oncolytics (ONCY) - another share price on a tear here without positive catalysts and only one compound in advanced development. There's no binary event in the immediate future, just a 300M market cap that seems wildly disproportionate to the long-term prospects of unproven anti-cancer agent Reolysin and a cash position of 24M. Ultralong has piled on the underperform side which adds a measure of confidence here. A deep expiration date seems appropriate and the bid/ask on March 2011 2.5 strikes is 0.10/0.40.
Question for the options experts - what's the best way to play a huge bid/ask spread like this? It would seem strange for me to buy something for 40 cents that I couldn't sell for more than 10 cents immediately afterwards. So do I enter a limit buy for 10 cents? Or something between 10 and 40 cents? What should I expect to sell this option at if I already own it?
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