Strategy: Iron Condor
Buffer to strike: 9.11% (call side) 8.4% (put side)
Max risk: 10% of account
Price at entry: 371.18
Put Spread: -340 + 330
Call Spread: -405 + 415
Min contracts: 1
Company description: REGN is a pharmaceuticals and biotech company that produces drugs all around the world.
Implied volatility and probability: IV is 31.10 with probability of success at 74%. This is lower than the normal 90% but it is because this is an iron condor which yields twice as much as a normal spread but is exposed both on the up side as well as on the down side.
Support and resistance: There are two key support/resistance levels, one at 360 on the bottom end and one at 384 on the top end. There is also a middle level which is around where the current price level is:
Exit strategy: At time of writting this trade as a 74% probability of success, ideally the trade will expire worthless within the 405 and 340 strike prices. I’ll close this trade off if the strike prices are breached by more than 50% of max loss which would be at 410 or 335 levels.
News and thoughts: The main reason why volatility has picked up with this trade is because REGN has had some legal trouble lately with a cholestrol drug that they had released. Good news came in for them in the courts allowing them to continue selling the drug however they did miss thier quarter 4 earnings estimates so the price of the stock took a hit. Overall this company has ups and downs down the road so I have a neutral stance on the stock.
Update 28/02/2017: Stock took a hit a few days after entry, not sure why but then rebounded off the 359 support quiet strongly. Support levels are holding well, 13 trading days left.
Update 03/03/2017: REGN seems to be traveling along nicely so far, Trump did have recent speech which spurred the market upward as he reinforced is view to reduce taxes accross US businesses. REGN has had some bullish articles written about it recently but they failed to move the stock price much:
Update (expiry): Trade closed successfully.