Answers - Finance

Option is a very popular derivative because its price is cheaper than other derivative such as future. Blue chip stock is a very volatile stock but it is very expensive. However, by buying option of the blue chip stock, we could earn profit just similarly like buying the stock. Investing and trading option

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

seem to be very easy just like buying stock. However, due to the existence of time value and also the expiration date of the option, buying naked option is very risky. This is because if the stock price is going down a lot just after you have bought the naked option, after a certain period of time, although

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

the stock price has gone up, the option price may still below the ask price that you have used to buy this option. That why we need strategy to invest or trade option. Option is a very powerful tool in investing and trading stock. By utilizing option, we could earn profit from the stock that moves upside,

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

downside and sideway. Moreover, option also could be used to execute arbitrage strategy to earn a profit no matter the stock price is going up, down or sideway.

Back spread is one of the option trading strategies that is quite popular. This strategy is quite similar to a Chinese gambling called big and sma

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

ll. In this gambling, when we stake big and the three dices after shook and opened show the total point is big, we will win one fold of the money that we have staked. That means if we stake 100, we will get back one more 100. But if we loss, we will loss 100. Back spread strategy is quite similar to this ga

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

mbling game. That means if we invest USD 1000, we either get back one more USD 1000 or loss USD 1000 that has been staked in. The maximum profit and loss is USD 1000. That has fixed. You won’t loss more that that. Actually, back spread is the reversal of the ordinary spread. The maximum profit and loss is n

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

ot always the same. Sometimes, it will differ a little bit and depend to current price of the stock.

This strategy could be executed by buying out-of-the-money option and selling in-the-money option. Because the price of the in-the-money option is more than out-of-the-money option, the amount of money that

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

has been received after selling in-the-money option will be enough to buy the out-of-the-money option. Although like this, we still need to put an amount of deposit in our trading account and the amount usually is equivalent to the maximum loss that you could incur if the stock price goes to the reverse dir

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

ection. So, if we are expecting the stock price will go up in the near future, we should buy out-of-the-money and in-the-money put option. Conversely, if we are expecting the stock price will go down in the near future, we should buy out-of-the-money and in-the-money call option. Just for easy to understand

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

, we try an example. Table below shows a list of put options for MMM company stock, which will expire in Apr 07.

http://www.makemoneystocks.com/back-spread-table1.jpg

Table 1: List of put options for MMM company stock.

Cur

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

rent price of the stock is USD 80.94. Put option with its strike price more than current price is in-the-money option and less than current price is out-of-the-money option. If we are expecting the stock price will go up in the near future, we will buy one contract of 80 put option (MMMPP) and sell one cont

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

ract of 85 put option (MNZPQ). When we sell option, we will receive an amount of money that is equivalent to the bid price multiplying with the number of unit that has been purchased. The amount of money that has been received per unit option is USD 5.2 and the amount of money that we need to pay per unit o

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

ption when we buy out-of-the-money option is USD 2.7. Therefore, the net amount in your trading account after executing this strategy is USD 2.5 per unit option. That means there will be USD 250 net in your trading account. The maximum profit and loss are calculated as follow:

Maximum profit = In-the-money

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

option bid price – Out-of-the-money option ask price

Maximum loss = (upper level strike price – lower level strike price) – (In-the-money option bid price – Out-of-the-money option ask price)

Upper level strike price is 85 and lower level strike price is 80. In-the-money option bid price is USD 5.

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

and the out-of-the-money ask price is USD 2.7. After substituting all values into the equations above, we will know that the maximum profit is USD 2.5 and the maximum loss is also USD 2.5. So, if we buy one contracts each of the in-the-money and out-of-the-money option, the maximum profit is USD 250 and th

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

e maximum loss is also USD 250. The break even point for this strategy could be calculated using equation as follow:

Breakeven point = Upper level strike price – maximum profit Or Breakeven point = Lower level strike price + maximum loss.

In this case, the breakeven point is 82.5. As long as the stock pr

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

ice goes up more than 82.5, we will earn a profit from this strategy. We only could earn the maximum profit if we keep the position until the expiration date. If we sell off early before the expiration date, we could not earn the maximum profit. But we still can earn money but with a little bit lesser than

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

if we could keep the position until the expiration date. This is due to the incomplete gaining of the time value of the sell off in-the-money option.

So, by utilizing this option trading strategy, you could earn a profit as long as your prediction accuracy is more than 50 %. That means you have to be accur

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

ate for at least six bets within ten bets. From here, the maximum continuous loss is four times. Therefore, in order that you won’t lose all your money until you could not continue to bet, you have to keep four back up moneys or more. So, if you lose one bet, you still have the money to continuously stake f

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

or the following bet. Like this, as long as you could keep your prediction accuracy more than 50 %, your money will continuously grow along the time. So, if you interested to know more about option trading strategy, just drop by our homepage and we will show you how to utilize option to maximize your profit

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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