Stock of Spectrum Pharmaceuticals falls as expected
Spectrum Pharmaceuticals (SPPI) drops for a second day today following FDA's approval of its drug, Fusilev. Surprised? Not really (read here to know why). Investors pulled out of the stock, worrying about the slow sales growth of Spectrum's non-Hodgekin's lymphoma drug, Zevalin, suggested in the 1Q earnings released today. Even though the company's earnings were 496% higher compared to the same quarter last year ($41M vs $7M), the sales of Zevalin had remained unchanged meanwhile ($6M). Since the excess profit seems to be solely due to the sales of Fusilev during a time of shortage, investors do not buy into the persistence of Spectrum's strong earnings. Most people imagine that when leucovorin becomes available again, patients will undoubtedly choose the generic version over Spectrum's drug, which is roughly 10x more expensive. 
How I trade?
Expecting a quick slide of SPPI post-FDA's approval of Fusilev, I sent out a tweet (@michaeljuan01) on Sunday, May 1, the weekend before the market had an opportunity to react to SPPI's late Friday announcement. The tweet also contained a link showing the price estimates of SPPI following Fusilev's approval based on analysis of the data collected from 3 of the most recent and popular biotech stocks following an FDA approval. Given this information, I recommended buying either the May $10 and $9 or June $9 put options. The next morning, I was able to have my May $9 and June $9 put orders filled @ $0.5 and $0.78, respectively (see my tweet), which I thought could be lower. It wasn't long until SPPI fell as expected, losing 11% of its peak value in 2 days. This morning I sold my options at the steepest share price drop and profited 140% (sold @ $1.20) and 61% (sold @ $1.25) for the May and June $9 puts, respectively. This is how I trade - A strict system that allows me to follow a predictable pattern and enables me to allocate a small portion of my fund to a relatively low risk/high reward trade at a rapid pace.
Follow me on Twitter (@michaeljuan01) for my next trade targets.
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