Never fails, break your rules and get punished. I usually don’t trade outside of market hours unless hedging an existing position. After watching ACHN trade up to almost $13 after the collaboration announcement, I decided I needed to be involved and averaged in long at $10.50. I figured the price was right and the market was inefficient . I was right on both accounts, The price is always right no matter what and if the market wasn’t inefficient, stocks would trade at the same price until new information was released.
Figuring the JNJ stake after dilution was worth about $10.40 a share I thought I would be ok. I expected some upgrades and the stock would trade back to $11 ish. At worst, I would get stopped out at $10. The stock barely traded at $10 premarket and I couldn’t get out. I wasn’t happy where it stabilized at $9.80 so I hung on. After selling half of the position at $9.44 on the open and selling the JUNE 9 straddle for $1.50, with luck I’ll get out of half of my position by June expiration if all goes well. I expect the stock to be dead money and the shares issued to JNJ were at $12.25 so I feel $9 should be the bottom end of the range.
A series of mistakes were made here. I violated my after hours trading rule, I didn’t take the first out when I could, and I misinterpreted the situation of expected buyout vs. a collaboration. Lastly I was caught up in the “I’m missing out feeling” since I actually was in the name earlier in the week but was out of it when the news hit and I was nauseated by the fact the stock was printing in the $12 range in size.
The old adage still holds true, it’s better to be out of a position wishing you were in, than to be in wishing you were out. lesson learned- again.
