The Biotech Trader Lounge

[gambler2075]

ICGN ran up twice on buyout hysteria, then when they found out it was 6$ per share, the longs got smashed...

ICGN - SharpCharts Workbench - StockCharts.com

‪Muse- Hysteria‬‏ - YouTube

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[Slug]

ICGN ran up twice on buyout hysteria, then when they found out it was 6$ per share, the longs got smashed...

ICGN - SharpCharts Workbench - StockCharts.com

‪Muse- Hysteria‬‏ - YouTube

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Weird that the valuation was so far off. Did ICGN just negotiate poorly?

[gambler2075]

Weird that the valuation was so far off. Did ICGN just negotiate poorly?

No, it was just that the longs were dreaming of ridiculous buyout prices... As usual, they were overly optimistic.

‪Lord of the Rings Requiem for a dream‬‏ - YouTube

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[gambler2075]

Wow missed a huge bounce on DVAX, looks like the AM selloff was a bit overdone, bounced from 2.20 to 2.70... of course, premarket it bounced from 1.80 to like 2.70 too...

‪overkill- by men at work (with lyrics)‬‏ - YouTube

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[Slug]

Not biotech, but I picked up some Nov. 2013 EK bonds today yielding 15%. Safety in my Roth.

AFFY drifting down. I'm hesitant to do anything before the data.

[KTP]

Not biotech, but I picked up some Nov. 2013 EK bonds today yielding 15%. Safety in my Roth.

AFFY drifting down. I'm hesitant to do anything before the data.

Eastman Kodak bonds are going for 15%??? That is insane.

The company is in bad shape, but the patent portfolio is worth a bunch and this would be used to pay off bondholders first in a BK so you are fairly well protected.

I wonder if I can get some Nokia bonds to pay me 15%...they have a similar horrible stock price but 10Billion in the bank and a huge patent portfolio worth another 6B or more.

[gambler2075]

Still sneaking my way into that biotech without moving the price too much, still have another 200-300K$ left to add...

Alot of these bios are way overbought, I am running out of underpriced bios. Preferably a drug that is not discovered by the masses/momo players yet.

‪Huey Lewis And The News - I Want A New Drug‬‏ - YouTube

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Well, that was pretty non-eventful, loaded up 500K$ of said stock and then saw weakness/resistance and unloaded, plus 3K$. Stock is now down from where I bought it.

Working into a longer term play now, I don't really like many bio stocks now... trying to just limit myself to longer term swing plays.

BTW for those that are in AFFY, in the next week or so, probably on July 31, +/- 5 days, the FDA will rule on their NDA application. I am hesitant here, I think there is a 90% chance that it is accepted, (the APPLICATION, not that the drug is approved) and the stock price jumps 10%. But there is also the 10% chance that the FDA decides to smash the stock and reject the application, and the PPS drops to 4-5. Biotech is all about risk/reward, and I'm sitting this one out. Most noob traders don't look at the potential downside risks of their stock positions, but are blinded by upside only. To be a good trader, you have to look at the potential downsides first. The FDA doesn't do many RTF's (refusal to file) but when they do, it is a doozy.

‪Sultans of Swing (with lyrics)‬‏ - YouTube

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[gambler2075]

CNBC had a segment on high frequency trading (HFT) the other day... it really has put alot of scalpers out of business, and makes that whole subset of trading (scalping) basically obsolete. You can't hope to compete with a algorithm that sends out millions of quotes per second, and more importantly can pull orders AFTER you put in your sell order (this has happened to me many times when I tried to smash a bid on a thinly traded stock... I sent an email to a beginning trader explaining why subpennying (which is not exactly the same as HFT but is done by a machine) makes a completely unfair playing field)

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Ex 1: I am trying to by 100K shares of ETRM... if I put in a limit buy order for 100K at 0.72, when the bid ask is 0.72 by 0.73, within less than 1/4 of a second, a buy order will appear at 0.7201
and since I cannot bid in fractional pennies through most brokers (not etrade) as a retail trader, I cannot get filled.

Ex 2: When I am trying to unload on a huge bid. I have been in scenarios where a 1$ stock is running up fast, and huge bids are flashing, maybe 250K... I had a 50K position that I wanted to unload, and I saw that the pps stopped moving (at ~7% profit level).

Then a huge bid appeared probably 200K$, which was trying to scare people into buying, assuming the price would continue up. Then, it sat there for 2-3 mins. I put in my limit sell order at about 2-3% UNDER the bid just in case. Should have filled on the bid. But the bid was HFT, and they are fast enough to see my order, and pull their bid orders milliseconds before it executes. I get filled at the low end of my limit sell. Lost about 2000$ (actually, to be exact, made 4K instead of 6K) by not getting filled on the bid that was showing.

I am fine with the game of putting up huge bids to scare up buying and huge asks to scare people into selling. But a bid is a bid and an ask is an ask. If someone takes me out with a huge buy order above my ask, I should not be able to see it, and pull my ask order before it gets executed.

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Defendtrading had a nice couple of explanations on subpennying:

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http://www.defendtrading.com/Sub-penny_trades_Compromising_NBBO_SEC_Meeting.pdf

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‪The Humans Are Dead - Full version‬‏ - YouTube

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Just an additional comment as why it is bad to be subpennied, despite what non-traders say, I believe that in fast-moving markets (specific stocks, in specific situations of greed or panic) the market is non-random. There are times when you should be buying or you should be selling. When you have found a situation where you should be buying (ETRM, as above in example 1) then you can never get filled at the bid. The algos step in front of you by 0.0001 and soak up all the shares that other humans are selling (when they shouldn't be). If you try to bid at 0.72 then immediately, a 0.7201 bid shows up, which prevents you from EVER getting filled. But you cannot bid 0.7202 as you, the retail trader, is prevented from entering sub-penny orders. Which means you can never buy unless you jump up to the ask and grab whatever is on the offer, 0.73. Now, this isn't a big deal when you are dealing with small sizes (by small I mean if you are trying to build a position of less than 100,000$ in a given stock). But when you start building bigger positions, there simply is not enough liquidity to just jump up and grab asks. So you are forced to pay way more (like 0.74, or 0.75 in this situation), which screws the retail trader.

The situation is compounded by the fact that the same thing happens in reverse when you want to sell. Let's say the stock runs up to 0.80 and you want to unload your shares (that you should have gotten at 0.72 but really had to get at 0.74 or 0.75), well, then you put in a limit sell order at 0.80, and hope that some retail noob buys it. Well, immediately you are subpennied again (this time on the ask) and a 0.7999 sell order pops up. Now, you are not the best ask, and any noob buying will buy at 0.7999 instead of 0.8000, as it is cheaper and a 'price improvement'. Meaning that you can never unload your position unless you smash the bids at lower prices, say at 0.77 or 0.78... The end result being, what should have been an 8c profit, turned into a 2-3 cent profit.

The above scenario basically explains the fact that (human) scalpers are extinct. Every scalper I knew who was successful 5-10 years ago has had to give up scalping.

Edit #2: I also realized that non-traders may have no idea what I am talking about when I am talking about quotes appearing, so I will add a screenshot of what basically all serious traders have, which is the level 2 quote screen, in this case, for Microsoft (MSFT). You can see all the bids on the left and the asks on the right, and the numbers of shares people are willing to buy or sell. This screen is constantly changing, probably 5-10 times per second. In this case, getting sub-pennied on the bid would mean that a machine stepped in front of that order at 26.23 and bid 26.2301, which would get filled before 26.23, if anyone wanted to sell. This isn't a big deal here, because MSFT is very liquid, but it is a big deal when you are dealing with stocks with smaller market caps.



Edit #3: The other important thing to add about being sub-pennied, is that you are selectively subpennied, meaning that you are subpennied most of the time when you were making the right decision, to buy or sell, but when you are making a bad decision, you are not subpennied and your order sits there. So if buying ETRM at 0.72 was a bad idea at the time, then your order would sit there and you would buy the next person who wanted to sell at 0.72. And, no, this is not a 100% rule, otherwise, you would just send out some test orders to see if you were subpennied or not, to determine if you had a good idea or not. Also the algos don't bother with subpennying you, even if it is the right idea, if your order is too small (say, <10,000$).

[gambler2075]

Yay! A big spread trade in my IRA looks like it might actually hit.

I have been holding 20 spread contracts for Apple Jan 2012 $350 $380 calls, purchased for $12, and it looks like Apple just blew away earnings and will open tommorow near $400. While it is not Jan. yet, this would put both legs of my spread in the money currently, making it worth the full $30 if the $380 short leg is called away.

$60,000 on a $24,000 trade. Will be my best win ever. Possibly I could get out early for $50,000 or so if both legs go really deep in the money. Not sure what I will do.

Did you get out of this trade? how much profits? BTW, nice call. Wish all of trading were this easy.

&#x202a;The Beach Boys - Wouldn&#39;t it be nice&#x202c;&rlm; - YouTube

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[KTP]

Did you get out of this trade? how much profits? BTW, nice call. Wish all of trading were this easy.

&#x202a;The Beach Boys - Wouldn't it be nice&#x202c;&rlm; - YouTube

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No I am still holding it. The spread is worth about $21 now even though Apple is trading well above the upper $380 call I sold. It will be worth $30 as the time value decays, assuming the stock doesn't fall below $380.

I hope they solve the debt ceiling soon...

[Slug]

Well, that was pretty non-eventful, loaded up 500K$ of said stock and then saw weakness/resistance and unloaded, plus 3K$. Stock is now down from where I bought it.

Working into a longer term play now, I don't really like many bio stocks now... trying to just limit myself to longer term swing plays.

BTW for those that are in AFFY, in the next week or so, probably on July 31, +/- 5 days, the FDA will rule on their NDA application. I am hesitant here, I think there is a 90% chance that it is accepted, (the APPLICATION, not that the drug is approved) and the stock price jumps 10%. But there is also the 10% chance that the FDA decides to smash the stock and reject the application, and the PPS drops to 4-5. Biotech is all about risk/reward, and I'm sitting this one out. Most noob traders don't look at the potential downside risks of their stock positions, but are blinded by upside only. To be a good trader, you have to look at the potential downsides first. The FDA doesn't do many RTF's (refusal to file) but when they do, it is a doozy.

&#x202a;Sultans of Swing (with lyrics)&#x202c;&rlm; - YouTube

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Nibbling on the AFFY 8 Aug calls. Just playing the lottery though.

[gambler2075]

I think PEIX hit the low over the past few weeks, watching for bounce here, no position, 1.05 now.

&#x202a;Cracker - Low&#x202c;&rlm; - YouTube

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[Slug]

I think PEIX hit the low over the past few weeks, watching for bounce here, no position, 1.05 now.

&#x202a;Cracker - Low&#x202c;&rlm; - YouTube

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Now that is a depressing 5 year chart!

[gambler2075]

Now that is a depressing 5 year chart!

Mmm... depressing for an investor, yes, but then again, what is someone doing investing in a alt energy stock that was pumped to the moon? For a trader it represents opportunity. No position, still watching.

&#x202a;Crash Test Dummies - MMM MMM MMM MMM w/Lyrics in Vid&#x202c;&rlm; - YouTube

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[KTP]

I just checked LEDS...not looking so bright now. I think it is going to be another one of these stocks who start up with a trendy name and end up bust in a few years.

I should start a new company that is called Green Nanotech Smartphone Solar Solutions...could get billions at an IPO.