Trade Alert: Biotech

A rare, large cap value trade from our Multibaggers list.

Selective After The Relief Rally

Earlier this week, we added long exposure in several names after the market’s relief rally on ceasefire news in the Middle East. Since then, we’ve stayed selective. Some of the names that looked interesting on the screens were simply too expensive in the options market after their recent moves, and others didn’t give us structures with reward/risk profiles we liked well enough.

That’s part of the process too. We don’t need to force trades just because a stock passes one screen or another. We’d rather wait for a setup where the structure, the timing, and the price all line up.

Today’s Setup

Today, we’re taking a shot on a large cap pharma name that came to us from one of our Multibaggers accounts. As a reminder, our Multibaggers list is comprised of accounts from our Market Watchers X list that have had documented, 100%+ gainers over the last year.

Unlike some of the faster-moving names we looked at last night, this one doesn’t have a great chart right now. But it does have much stronger fundamentals, a major earnings catalyst coming up in early May, and another one in early August. And it passes our falling knives screens. So rather than trying to trade it as a short-term momentum name, we’re giving it room to work through both earnings cycles with a longer-dated structure, while financing that exposure with nearer-term short premium and a defined-risk put spread.

Sticking To Our Process

As usual, we estimated the fair value of the structure first and then looked for a way to enter it at a discount. This isn’t a name that typically fits our risk budget for a 4-leg hybrid if we have to pay up for it, so we’re being a little stingier here than usual.

That means if we don’t get our price, we won’t chase it.

Today’s Multibaggers Trade

Large-cap pharma / obesity-drug rebound theme