ISEE | The Wheel Strategy Trade Idea

IVERIC bio, Inc. (ISEE) is headquartered in New Jersey. This clinical-stage biotech firm is focused on discovering and developing novel treatments for retinal diseases, with a focus on age-related and orphan inherited retinal diseases (IRDs).
ISEE is trading at around $12 – $13 range recently.
Zimura is the drug candidate that completed a successful first phase 3 study (GATHER1).
A second phase 3 study (GATHER2) is expected to be released soon.
The IV % Rank is close to 100% right now (red box image below) in anticipation of the second phase 3 study result.
The IV itself is at around 3.06, which is extremely high.

Fundamental Analysis

According to this article, the company raised enough cash last year that should last until mid-2024, so additional capital raise in the next 30-60 days is very unlikely.

In other words, the company is unlikely to issue more shares in the near future to cause the stock price to fall.

The company ended the first quarter with approximately $345 million in cash and marketable securities on the balance sheet. The company raised approximately $150 million via a secondary offering in October of last year at $16.75 a share. Leadership projected on its first quarter press release that current funding levels will be sufficient to fund its planned capital expenditure requirements and operating expenses through at least mid-2024.

The book/share and cash/share added up to a little over $5. While these numbers don’t really mean much when it comes to valuing biotech companies, since these companies need to consume cash until they have a product and their true value lies in intellectual properties that may not be included in the book value, in a short term though, the stock is worth $5.

Technical Analysis

Based on recent price action (last 12 months or so), $8 seems to act as a support line.

The Wheel Strategy Trade Idea for ISEE

Taking both Fundamental and Technical analysis data, even if the second phase 3 study (GATHER2) fails, it is highly unlikely for the stock price to drop below $5.

September 16, 2022 expiry $5 strike Put is at around $0.6, which equals to 12% return in 29 days (counting from 8/18/2022).

In other words, selling one $5 strike Put costs $500 and nets $60.

Sidenote: There are many ways to trade the Wheel Strategy and finding stocks with high IV options is one of my preferred ways to trade the Wheel Strategy.

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Tony

I have been trading options since 2010 and have been testing and experimenting with various trading styles. Fundamental Analysis based, Technical Analysis based, Trend Following, Day Trading, Swing Trading, etc.

My primary option trading strategies incorporate volatility and I am constantly experimenting with various trading strategies to improve my PNL.

I hold two Master’s degrees (MSc and MBA) with career experience as a cancer research scientist and a digital marketer.