Buyout Buzz Builds for Biotech With Cheap Options

Good morning, Power Profit Traders!

If you didn’t catch me LIVE at 11 a.m. ET yesterday, well…I was told the specs took my session from its usual 10/10 to “off the charts.”


Eat your heart out, Blue Steel

I kid, of course, but on a serious note — if you aren’t watching as much LIVE trading and teaching you can, you’re only doing yourself a disservice.

In fact, I’m so passionate about real-time, interactive teaching that very soon, I plan to give my free and premium traders a lot more opportunities to catch me and my team in action and ask questions, like Sybil here yesterday:

You can actually catch my long-time team member Jay Harris LIVE at 11 a.m. ET TODAY here, right after my podcast partner Chris “CJ” Johnson, so be sure to hop in the room soon!

But I also plan to deliver some valuable lessons right here in your Power Profit Trades newsletter, for posterity.

So today, I’ll review my answer to Sybil’s question about limit vs contingency orders, and dive into today’s Power Profit Trades Watchlist from the Morning Report in the TG Suite app — including one rumored buyout candidate with cheap options.

Limit vs. Contingency Orders

When placing a trade with your broker, there are dozens of routes you can take, depending on your specific risk appetite, strategy, and expectations for the underlying.

Many traders simply use limit orders, which will only fill if the underlying shares hit a certain price.

Therefore, there’s no guarantee the order will fill at all, and if it does, it may not be immediately, like a market order would.

In a nutshell, a contingency order (also called a “conditional order“) gives you the ability to get into a trade IF and WHEN something happens.

The trade environment must meet certain criteria before the contingency order will execute. For instance, the order could be contingent on time and price, a certain amount of volume, or even another order executing.

Contingency orders are useful when putting on multiple legs of a strategy or stops, as attempting to do this manually on a volatile stock could mean an unfavorable move in the wrong direction keeps you out of a leg — or worse: in at the wrong price.

The short version: With contingency orders, you don’t have to be glued to your computer all day — and that’s certainly something I can get behind. More time to teach!

Merck, Bristol-Myers Rumored Suitors for Acceleron

Today’s Power Profit Trades Watchlist is brought to you by the Morning Report Cheap IV list in the TG Suite app. (For instructions on how to find and download the app, click here.)

Although Virgin Galactic (SPCE) has maintained its spot on this list since last time we checked, “meme stock” GameStop (GME) has been booted from the No. 2 slot, courtesy of biotech Acceleron Pharma (XLRN).

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Rumor has it Acceleron is a buyout candidate, reportedly in advanced talks to be bought by a large pharmaceutical giant for a cool $11 billion, or about $180 a share.

As of this writing, companies like Bristol-Myers Squibb and Merck have emerged as likely suitors, and a deal could be announced sometime early this week, according to the Wall Street Journal.

Nevertheless, XLRN’s at-the-money options are a relative bargain at the moment, compared to the past year.

The stock’s current IV is at the low point of its 12-month range, per the above Cheap IV list from the Morning Report tool.

Perhaps volatility expectations are running low because traders expect XLRN to stay relatively glued to that $180-per-share price point, which aligns with the rumored buyout bid. The equity closed Monday at $178.87.

But if new reports emerge that XLRN could command more or less than that price, or if the rumored deal falls through, IV on the stock’s short-term options — both on the call and put side — could shoot higher.

That’s all for now, but make sure to jump into this room at 11 a.m. ET today, to watch my trading buddy Jay Harris unleash his options wisdom LIVE!

He might not have the sunglasses swag that I do, but then again, who does?

Tom Gentile
America’s #1 Pattern Trader, Power Profit Trades

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