MRNA Trade on Dec 1, 2020 14:38 from Marius: Tradervue User Stock Trades.

Markets opened within range from last week. Breadth and rotation still continuing into the new month. IWM and the DOW starting to see some selling but not notable. QQQ and large caps has been seeing strength opening into the week.

Fundamental Analysis + Trade Plan Notes

MRNA has been a recent vaccine runner trading in ATH's. This has the best efficacy rating compared to others such as PFE and AZN. Market cap as of today is 55.8B with PE/E 25.2x NTM and EV/Sales at 5.9x NTM. They have submitted request for final approval which will take place by 12/17 and PFE at 12/10. Analyst median price target of 114.35 and high of 185. More coverage on the buy and strong buy rating. It has forward up trending estimates on sales, EBITDA, and EPS. YTD performance at 620.91%.

My current knowledge here is limited and I'm noticing now going through the fundamental data the justification for the strong buying the past couple sessions. This does not exclude a shorter-term short which this trade is positioned for. Primary trade plan was to trade the turn and reversal. Long-term the company looks to be more growth ahead. I'm selecting this trading and putting this in context of the overall them for the year. At some point these companies and "stay at home" benefiting business will see profit taking. As seen with today's price action there was notable profit taking and price action to see shorter-term selling and digestion of the strong move. It can continue with and underlying strong bid in the market and risk parameters have been set for the trade.

Quantitative Analysis

Intraday Fundamentals

RVOL 4.73
AVOL 26.528M
ATR 8.97
Short Float 6.93%
Market Cap 47.96B
Inst Own 52%

Options Statistics

IV 134.84%
IVP 60%
P/C Ratio 0.677
VWAP 156.703

Noting the second day with higher call volume than puts. This is with the profit taking + selling today.

Options Positioning

OI 0 (new strikes added)
Vol 5,790
Delta .07
Theta -.47
Vega .02
Gamma .00
Prob T 8.51%
Prob ITM 4.03%

MMM +/- 20.961
IV Series 190.26%

New strikes were added today. I had put on a paper scale in position on the front side yesterday at 195 and is working. I was waiting for a backside and price action confirmation for a live trade. This is something I can scale and work into in the future. The 200 was chosen which made sense with the current risk parameters and type of trading I have edge in.

Weekly 195 Call 2 days (paper)

Weekly 200 Call intraday (live)

Tape Reading

Large calling selling early in the session. Large put selling towards end of session (not shown). More concerned on the latter aspect as the trade develops into the week.

Technical Analysis

Adding a chart to note Implied Volatility. March is showing the highest peak. Noting the kill candle and engulfing candlestick price action. High volume market with a potential reversal. Shorter-term momentum is to the downside and burden to the buyers. (which has show reversal development into the close and after hours)

Reviewing price action there was a stuff at the open, breakdown + backside short at from pre-market and VWAP. Further breakdown and selling after and strong reversal towards EOD and into after hours and current pre-market.

Main level of trade decision and risk management is 150 were VPOC, inflection, VWAP's, and FIB level targets coincide.

Mid Trade Risk Management + Notes

The trade has developed into more risk with after market trading to 150. I'm not anticipating any additional fundamental developments which will attract more buyers, however this is an area for potential (now showing) buyers and support. The price action of the whole day from a low to mid time frame is bearish. I'm keeping in mind these relative strong areas and especially bio-techs can run more than one may think. Anticipating price action compression after the move up and strong reversal here but open minded and managing risk. Exit order has been set to take profits for a volatile open and managing risk manually but with alert triggered trade decision levels.

The quantitative model is showing position favorable outcome as of the close but will have to pay close attention on how it trades tomorrow being 3 days left in the option. This can be the trade that will end my winning streak with a big hit but open minded to continue to push my limits, playbook, and trade process further while managing the risks.

Trade Review

Trade auto closed with orders pre-set before the open. Positioned earned 40% of total max profit on trade. This was with margin requirements increased overnight. The trade executed at the opening bell which is a reminder on how these positions can be executed much faster than manually. 150 was a inflection level that I was concerned of overnight and lost some sleep figuring out a new game plan seeing the price trade up in after hours. The trade plan originally was to hold the position into expiry dependent on price action development. It had turned into a momentum scalp trade into the next days open.

Merck in the pre-market disclosed that it had sold its longer-term position in MRNA but keeping the private investments. This was sold into notably and eventually at open flushed into Y low which found aggressive buying. By this time my position had been fully exited but I watched the mark and learned how much more volatile things can get. If I had kept the position I would have seen such a wide fluctuation that probably would have put me on tilt in addition to having inadequate sleep. I was already not in an optimal state so letting the orders execute automatically according to new plans was the best decision.

I could have re-evaluated + re-entered the position but I thought it was best not to considering the volatility and current states. 150 is a level I'm strongly benchmarking and price had traded into here before sellers started to show strength. It did not get over this for the whole day. The IV on options was decreasing.

After letting this pass and develop. I reviewed yesterdays monthly intermarket conference call. Everything started to make more sense after taking into account the bigger picture. Price around the globe in confirming strength and breadth in equities. This had me realize with the strong bid in the overall market, MRNA will have a bidding tailwind. Fundamentals are already positive for the company and when you include a strong market tail wind a sell-off is tamed.

Overall I will grade this as a B- as I need to be more prepared in managing risk with rising volatility. I need to know how specific names trade (which I have traded this twice before). And to re-affirm the big picture and be open minded with the price action until it shows confirmation of changes. It's ok to anticipate but not to have to much bias in a direction. Worth mentioning that the front side paper position is working very well. Although because of IV and margins increasing rapidly it may have been liquidated on the first day when it gaped up much higher. In the live trade I was even in a potential margin call even though when I entered the position I had left about 50% capital left over to cover for changes. Shows how volatile this can get. Especially in bio-techs and or markets/assets that are very strong.

Follow-up Trade Review : Tested front side starter short position

This separate trade discussed earlier in the report was initiated on the front side. I did not use live capital for this specific part of the trade due to the higher risk here but wanted to be working on the thesis and execute any playbooks that developed from it. Idea was to add possibly area's of possible expansion to the trade business. Again this is separate from the live trade but in conjunction with. Execution details are attached as an image only and not recorded in the usual details in the box.

This is how I started with options and futures. My intraday playbook trades that I executed live was extended with the newer trades. Like sampling and extending ranges building on top of strategies. This has been a key in building the trading for the business continuing to stack the variables and areas. This is essential to continuing growth as a traders edges. Important to risk capital appropriately and only until consistency and profitability defined levels has been reached. This directly manages drawdowns. Of course this can be reviewed in realtime if a rare opportunity presents itself and makes sense on specific developments.

The trade closed within the quantitative modeling parameters but because margin risk is calculated at the brokerage level the position might have been liquidated on the gap up and stuffed move. This could be related into the trading vehicle dynamics because of the higher IV and characteristics of the stock. I even almost got margin called in the live trade and that was on the back side. The quantitative model was correct in this situation but paired with my discretionary process risk was mitigated. I did not use my own risk mitigation process on the front side trade as I wanted to see how it would develop. The trade was a winner but R/R was not controlled as well due to the IV. Spreads may have to be used in this case and or even smaller positions. Common stock could also be used as some of the top traders have this method in controlling their risks as well. Will have to keep testing and re-evaluate on the next set-up but interesting type of entry/trade. Something I believe Shark does on the desk when he enters mid to longer-term trade ideas.