AGIX – Simply WOW

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We discussed AGIX quite extensively and then due to other opportunities in the market I temporarily discontinued discussing this ticker. Here is a snapshot from April Options chain and I am just wowed ! Implied volatilities, talk about 100s or 200s, sorry… It’s in 500s!! Olrite…Open interests, 5K, 10K, sorry it’s in 20s,30s and more and almost on every strike point. Even as far as $40.

So folks are betting that this $8 baby can rise to $40 should the results be positive. What’s going on here? Check out the details here:

So how do you want to play this? downside, humm the minimum it can go to is really zero (well it will still have value, but let’s assume 0 for our analysis) and the best case $40 (arguably, do you really think so? believe it or not, even $55 call strike is selling for $0.50), can we design a strategy that can play such a wide range (and of course anything in between)? Share your ideas pls via comments? I shall share my thoughts soon as well.

Stay tuned.

Profitable trading, OptionPundit

Comments

5 responses to “AGIX – Simply WOW”

March 15, 2007

Robert L.

I know that you dont like directional, but I see that as really the only way to play this one.

The numbers on the straddles/strangles just can’t be made to work. So, essentially, I think one must pick a direction as to which way this one is headed.

I agree with your point that the stock could go to zero, but I don’t see that happening, even if the results are negative.

I would go with a 7.5/17.5 bull call spread ($1.85 net debit, maybe better with the right fills), but not with my own money. Such a postion could be decimated pretty quickly if things go the wrong way. However, It may be worth a small play. I would assume that this position could be exited with a large percentage loss but lower actual $ loss. The potential, if results are positive, are 300-500% on risk capital, so still probably worth a small play if you have confidence that it may work out.

I think AGI-1067 fails, so I wouldn’t play the above personally. The smart money seems to be on the put side of the equation, so we will see what happens. Still, I imagine that the above listed strategy could be salvaged with a smaller loss if there is a bounce after the initial sell-off as the shorts go to cover. Who knows.

I am interested to hear what the others have to say.

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March 15, 2007

Sri

My play would be Iron Condor – 5/7.5 bear call spread & 7.5/2.5 bull put spread for a net credit of $4.10. Max loss is $0.9 & Max profit is $1.6. AGIX has to be above 3.4 for breakeven. This trade is purely based on risk/reward assuming the stock will retain some value in case of negative results and there is going to be a short covering bounce.

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March 15, 2007

jonmc

Optionsjunky had an interesting trade for this:
http://optionsjunky.blogspot.com/2007/03/agix-ratio-combo.html

It’s a back-ratio spread with added put insurance if you want it. The chains have bled out a little volatility since he posted, so you won’t be able to get quite that credit.

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March 15, 2007

3heart

I was playing this today. bought 3 Apr 15/25/40 call BWB for 0.20 each. Also bought Apr 10/7.5/2.5 put BWB for the size of 3/10/7. total credit is about $1700. B/E is about $4. maximum loss is about $1050. If it goes up to 10-12 before the announcement I am gonna buy some 5 puts to offset the down risk. Good luck to all and to myself!

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March 16, 2007

chiu

How about selling Apr $10 Put at $5.8 ?

On Apr expiration wee will breakeven if AGIX settle at $4.2 in stock price. We keep the $5.8 if AGIX is above $10. We will make x-$4.2 if x is between $4.2-$10. We will lose y-$4.2 if y

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