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Good morning, tradeologists. Today we opened up a little bit lower on the Dow Jones Industrial Average. We actually traded down almost 100 points. Right now, Adobe is just meandering around. That’s the problem. It’s up and down, but it hasn’t moved enough. We did a little bit of scalping yesterday. We did close to $100 in profits, just on the scalping.
We lost money on the straddle, because it’s fluctuating around the strike prices that we sold. We have the $40 call and the $40 put. That’s about the only real problem with Gamma Scalping. If it doesn’t move enough to scalp, even though we did about $100, we’re still down to $127 on the total position.
Right now, it looks like Adobe is going up a little bit, it’s going down a little bit, but it’s not really moving enough. We may end up exiting that trade. We’ll see. I’ll give it another day or two.
I want to take a look at Gilead Sciences. I entered this into my analysis worksheet. Gilead has a fairly low cost of the straddle, at $2.68 for the stock. The prediction software says that the range is $7.30 until expiration. That’s about 46 cents a day. Over the 60-day period, the actual volatility is low.
It doesn’t give us a big number here, but if you take a look at the chart for Gilead, it’s really been moving around quite nicely – a point, a point and a half, two points a day, sometimes. It had a dramatic sell-off here, which raised the volatility. Over the last 60 days, like I said, the volatility has dropped off significantly.
It appears to be moving. The stock really does move. And this biotech sector actually is a sector that has been moving. We had a few days that it didn’t move that much. It looks like it’s really starting to pick up, and the historical volatility in the last 60 days is fairly low. I may take a chance, and do that. It does seem to be quite active.
In fact, almost all the stocks in the biotech industry are quite active. That’s really what you’re looking for. You’re looking for active stocks. Even though the historical volatility might be a little bit on the high side – even though this is only 10, it’s not that bad – but they are quite active. I’m going to be looking at more stocks, like Genzyme.
Genzyme is up quite significantly today. When there is activity, when there is money flowing into that sector, what that means is that the stock will actually be a little more active, here. That’s a potential area that I’m going to be looking at. I’m going to do some analysis on other biotech industry stocks today. I will also take a look at my sheet. I really need to get back into another Gamma Scalping trade, since we closed out AVP yesterday, for a nice profit.
That’s what I’m doing today. As always, as we go through the day, I will be updating you. Stay tuned.
Just a quick update here. I’ve been taking a look at different biotech stocks. It seemed to be really in the news today, because of the potential takeover of Imclone Systems. Imclone Systems is being taken over by Bristol-Myers, so they’re up significantly today, over $17. Actually, the bid was $60, but they’re trading $4.10 over that.
As a result, there’s quite a bit of activity in different biotech stocks, and that’s what we are looking for – basically, who’s talking about these stocks? Gilead is up real nice today. They seem to have a very reasonable bid/ask, at $2.70 for the straddle. We have BioGen here. Their straddle is around $4.60.
Gilead, in contrast to BioGen, seems to have a reasonably priced straddle, at $2.70. I’m going to go ahead and put my order in for that. It just jumped to $2.73. Of course. I’ve seen it as low as $2.70, so I’m going to put it in at $2.70, and see what we can get.
If you take a look at a couple of different biotechs – remember, I put together this list for you, of biotech companies that are in the BBH. Gilead was one. Genzyme was one. Genentech had a take-out offer. AmGen has one. Seprecor – let’s take a look at that, really quickly. This got killed. Volatility is up. Too bad we didn’t have that one, because a move like that would have been really nice. It was fairly low volatility. I should have kept an eye on that.
I got my 10 straddles on Gilead. I got it at my price, which is very nice. They actually gave me a profit. Sometimes, it pays to bid lower than the market. I have a built-in profit of $50 on that. At the time, they were asking $2.73. I got it for $2.70. I have a built-in profit of $50. That was very nice of them. I appreciate that.
My Delta is neutral, at about 10. We’ll just keep an eye on that. It looks like Gilead is moving pretty good. Let’s take a look at the chart. It’s been moving around pretty good. Hopefully that will continue. The 60-day volatility chart is fairly low. I’m going to be okay with that, I think. As long as it keeps moving, we’ll be doing well.
That’s it for this update. I’ll talk to you again if anything else happened. Stay tuned.
Just a quick update here. ADB, Adobe Systems, has been trading sideways for most of the day today. Now, it’s really starting to sell off here. If we go to the Analyze tab, you can see that it’s starting to come down. We’re down about $150. It’s really starting to move down.
I have a fairly sizable short position. 500 shares, so far. If it continues to move down, we may even be able to get into profitable territory and start trading this again. That would be really nice. I could buy 100 shares of that back now, if I wanted to. There may be some more downside, but you have to scalp when you can.
We will go ahead and buy 100 shares, just do a little scalping here, because we’re short 500 shares. If we can get at least a little bit of profit going today, that would be very nice. I’m going to keep an eye on the chart, and see when it looks like it’s stabilized. We haven’t really been making that much progress on this.
We’re short 96 Deltas, so I can go ahead and buy 100 shares, and at least make a little bit of money off this trade here. I’m just going to wait a couple of seconds, just to get an idea. I’m keeping an eye on my other monitor, on the chart, so I don’t have to go back and forth here.