Ray Wollney

Using Options to Capture Dendreon's Volatility

Christian, thank you for your comment
I agree that the potential for a big move is there. This is why the implied volatility in the May options is so high. In anticipation of the FDA ruling the May "at the money" and slightly "in the money" calls and puts have been bid up to extremely high prices. Since I wrote the above article the implied volatility in these options has risen even more.
I'm not sure what you mean when you say the straddle is a low risk option. Buying or selling the straddle is a high risk option. This is not for risk averse.
As for the large short interest no one knows if most of that is naked shorts or shorts tied to options in some way ie a reverse conversion. So I'm not convinced that the short interest is a big deal. Also the if the FDA rules against Provenge then the stock will surely go down which would not restult in a short squeeze.
The question here is whether the straddle is a buy or a sale. We'll have to wait and see.
Thanks,
Ray Wollney