A trade review in Intercept Pharma

I received several questions this morning regarding my shift from long stock into Options on $ICPT so I thought I would provide a break down of the trade here. I had entered a long stock position in pre-market and exited the trade at $471.83. Here is the new Option trade:

ICPT_trade

  • Long the April $460 Calls
  • Short the March $460 Calls
  • Long the March $450 Puts
  • Short the March 28 weekly $450 Puts
  • This was done for a $10.72 debit
  • This trade takes margin

The options are very expensive so I wanted to kill 2 birds with one stone: 1) lower cost of owning April Calls and 2) capture any short-term weakness this week by owning Puts. So far I am getting the short-term weakness as price is hovering near the $410 level as I write this post.

 

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