Just take a look at those juicy options across all months. I am already in an unbalanced skip-strike butterfly spread that I highlighted in early Feb and I am comfortable staying in that position going into FDA decision. Here is the link for the trade I suggested: MDVN Butterfly
Today at 3:01pm, one trader did a really nice ratio spread on MDVN. Specifically, the trader:
- Bought 1500 of March $45 calls at $6.2 (bid/ask $6.0 x $6.3)
- Sold 3000 of March $60 calls at $3.1 (bid/ask $3.0 x $3.2)
The ratio spread was done for net cost of $0. The beauty of this trade is in the attached P&L chart to the right. Very similar to my original butterfly spread (see link above), this ratio spread loses nothing if the stock collapses. But if the stock takes off, the trade makes money anywhere between $45 and $75. The trade loses money above $75. The trader must be looking at current at-the-money March $40 straddle which is going for $19. If the stock runs up $19 to $59 on good news, the trade will handsomely pay-off nearly 150% return by March expiration. Interesting, after the trade was done, the implied volatility in the last hour continued to run up. Now the same ratio spread is going for $1.30 credit, which is even better than $0. If done for a credit and the stock collapses, you will still make money as you will end up keeping the credit.
I like the odds of both this ratio spread and my butterfly spread (though the butterfly has significantly more upside profit potential and much lower risk).
Good luck!
