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Shorting BioTech Catalysts: A Viable Investment?

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Avatar for R23
Written by   28
3 months ago

The Most Volatile Stocks

It is my personal opinion that the closest you can get to the cryptocurrency market in the traditional stock market is looking at options plays for IPO's, earnings and catalysts such as those in the biotech industry.

For those of you who don't live in the United States, the medical field is a total mess here and there is a ton of bureaucracy in everything from patient care to drug research (I'm sure there are barriers everywhere but they are notoriously bad here in the United States).

BioTech

Essentially for a drug to come to market it has to go through three phases of testing. The first stage is usually to prove that your drug has a use case at all where the two latter stages are aimed at testing and refining results to ensure safety in a released drug or treatment.

On the financial side of things, this presents three huge catalysts for any BioTech company looking to release a drug of their own. Even if the company passes phase one with ease, they may stall out so long in phase 2 or 3 that they run out of money and go bankrupt. When a company releases good results from a phase (noting that they are moving to the next phase) you can see HUGE gains, but if they get stalled or the results don't reach expectations you can see enormous losses within minutes.

When noting that only around 23% of biotech companies end up releasing a successful product, it begs the question of whether shorting/buying puts on a BioTech stock about to announce results is a solid investing option.

Now of course there are nuances to this and of course you shouldn't go blindly shorting stocks (or even taking advice from me on literally anything) but it is an interesting thought when you think about the fact that the most you can lose from your investment is 100% but there is more upside than that in your returns.

My Moves

I am playing two catalysts coming up in the next few days just to see how this strategy works out. I'm sure I will end up losing money because I am a terrible trader, but I am interested to see what happens when the results are released.

SPPI $1 Put Exp 10/21
BLUE $5 Put Exp 10/21

Please for the love of god don't follow my trades you will almost surely lose money.

Tips?

Is anyone experienced with BioTech investing? I've only ever lost money, but I was always taking the call option side of things hoping for great results that never came through. Please share what your thought process is.

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My name is Rob and I am a financial analyst with interests in cryptocurrency and blockchain. I have enjoyed my time thus far engaging with Web 3.0 and am looking to continue learning more and sharing what I learn through my experience.

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Written by   28
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