Optimer Pharmaceuticals' (OPTR) shares have once again experienced wild swings in the past few days ahead of FDA's decision on the marketing right of the company's antibiotic candidate, fidaxomicin. A new 52-week high of $13.40 was reached just now as the investment community expects to hear positive news today. Optimer's CEO is upbeat about the potential approval and ready to ramp up the sales forces for the product launch. According to his recent interview, the drug, being the first new therapy for C. diff infection in 25 years, will have its own category and become universally endorsed. What investors are most concerned with now is the labeling of fidaxomicin post approval, an issue that may play a significant role in the upside potential of OPTR after the news release.
Options strategy
I used some of the money earned during OPTR's run-up or pre-PDUFA 'Hike' to set up the following options play:
The way these options have been arranged allows me to walk away with no less money than I begin with (i.e. $6205) REGARDLESS of FDA's decision. It is set up such that my calls are fully hedged and my profit will range from $6275 (rejection) to $9585 (approval, high aim). Remember, this is ALL profit for me because I am using the money earned from the run-up (basically riding 'free' through PDUFA). Hopefully, a decision will be announced sometime before the market closes today so everyone can have a stress-free long weekend. Good luck!
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