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The founding members of Chimera Research Group have over 50 years of combined experience in the biotech and pharmaceutical sector. Their experience includes work at Investment Banks, Hedge Funds, Pharmaceutical Companies, top-tier Universities, and the U.S. Food and Drug Administration (FDA).... More
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  • $1 Strike Intervals May Portend Future Action in ANDS 0 comments
    Apr 14, 2010 1:26 PM | about stocks: ANDS

    The strike prices for ANDS were recently changed/adjusted from 2.50 strike intervals to 1.00 intervals for the May, June and September series.  Strike prices are set by the exchange and can be changed based on specific exchange programs/policies  (such as the $1.00 Strike Price Program(1)) and/or by specific requests from outside individuals or firms for inclusion of a new strike. In regards to ANDS, it appears that the company has been included in an exchange program.  Normally this change would not draw my attention – but I found the application of this program to ANDS to be out of the ordinary.  Here is why:


    • There are a limited number of slots to be included(2) in these exchange programs.  With all of the other companies to choose from, why include a small, relatively unknown, development stage biotech?
    • Most, if not all, companies that have the $1 strike intervals experience very high daily share volume and option volume.  ANDS has neither – daily average share volume is less than 500,000 and daily option volume is de minimis. 
    • Most small cap (or former small cap) biotechs that converted to the $1 strikes had impending, late stage drug candidate data – examples included VVUS, ITMN and BCRX.  ITMN actually converted to $1 strike intervals just prior to their recent substantial price gains.  ANDS has one early stage Phase II candidate and a few Phase I candidates – so no comparison there either. 
    • Further drawing my attention was the huge (for ANDS) 3,000 contract Call spread trade which occurred on March 11, 2010.(3)  Prior to this trade, total open interest in ANDS options was quite small.


    All of these elements may point to increased price action and activity in ANDS in the near to medium future.




    (1)    Source CBOE.  Please refer to Rule 5.5 Series of Options Contracts Open for Trading, The $1.00 Strike Program.

    (2)    According to Rule 5.5, the $1 Strike Price Program is limited, in total, to 55 companies, unless otherwise permitted by exceptions to the Rule.

    (3)    Full disclosure: I actually initiated a smaller, speculative trade in ANDS calls in March based on this unusually large spread trade.

    Disclosure: Long ANDS Call Options
    Stocks: ANDS
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