How to Make a Nice, Quick Profit on a Volatile Stock that ISN'T Moving??
Welcome back everyone!! Thanks for taking the time to watch this video.
Today I want to share with you a trade Idea that I did on this company, Biogen, and it is an excellent trading idea for a very volatile stock that just isn’t moving.
How does that make any sense…if its volatile, shouldn’t it be going up and down like a rollercoaster, right???
Sort of. This stock had a huge move up in early November of last year, and just a day or two later it dropped like a brick. Since then, the stock has been trading flat like a pancake.
The volatility I am referring to however, relates to the options premiums. Even though the stock is flat, there is a pending news event that has really created a lot of volatility in the option prices. Since volatility is so high, that pretty much eliminates any of the option buying strategies, because it will cost you a fortune to buy those options…and I will show you why in this video.
Since our main strategy is SELLING options, we can make a very nice profit on this thing, even though the stock isn’t moving, and that is because we are going to be collecting that inflated options premium.
Biogen had an Alzheimer's drug that was voted to be disapproved by a vote of 10-1 by the FDA's advisory committee last year on Nov. 9th, 2020. As a result of that news event, the stock plummeted. The FDA was supposed to revisit this and make a decision whether or not to approve in March of this year (they do not have to take the Advisory Committee's recommendation, although they often do).
Biogen is relying heavily on this drug to be a money maker for the company. If the drug does get approved, then things will be looking up for BIIB. If the FDA does not approve it, then that is going be be an ugly day for BIIB. As you can imagine, there is a lot of uncertainty right now as the decision can result in a HUUUGE move either way. That uncertainly has created a lot of uncertainty in the options prices.
The FDA is going to make a decision on June 7th. Until then, we are in a "wait and see" mode in regards to the stock. And as you will see in this video, the stock has been in a flat trading pattern for most of this year...most likely because investors are waiting to see what will happen on June 7th.
There is a very wise trading idea that we can use to take advantage of this flat trading range in the stock, but insane volatility in the options prices. It is called an Iron Condor, aka Condor. It is basically a trade that is a combination of a Bull Put Spread and a Bear Call Spread, both of which are income generating strategies...otherwise knows as being a SELLER of options.
I hope you like this video. If you have any questions, please leave a comment below.
Also, if you would like to learn more about this trading strategy, the rules that we follow to make this a consistent winner, as well as the other trades we use, please click on the links below.
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