Hong Kong and US pharmaceutical stocks remain active; have you positioned your portfolio?
Small Recap on Low-Cost Options | Moderna Stages a "Day of Miracles": Have You Ever Seen Calls Surge 600,000x Overnight?
Hello fellow investors, it's time for our market review again. Those of you who have been following "Bai Dao Plays Options" might be a bit surprised to see this issue:Why is it being released on Thursday? Don't we usually meet on Fridays?
That's right, because something happened in the US stock market last night (August 19, Eastern Time) that we had to discuss immediately: $Moderna (MRNA.US)$ It surged nearly 180% in a single trading session, soaring from the $60s to close at $174, bringing its market cap to nearly $70 billion.For a company with a market cap in the tens of billions, tripling in value in a single day is a sight rarely seen in the US stock market even once every few years.
Even more frenzied was the options market, where MRNA call options saw a collective frenzy last night. If fellow investors open the app,they might witness a spectacle where gains have "burst" the option chain, with four-digit, five-digit, and even six-digit percentage increases being commonplace.
Today, let's break down the ins and outs of this frenzy and discuss the right mindset to approach it.
MRNA: Two layers of driving forces converge; timing and momentum align perfectly
To understand the craziness in options, we must first understand why the underlying stock moved. This massive bullish candle for MRNA is actually driven by two叠加 (overlapping) forces.
The first layer, and the most core one, is a major clinical breakthrough in cancer vaccines. According to recent news, Moderna and $Merck & Co (MRK.US)$ Merck & Co jointly developed a personalized mRNA melanoma vaccine, which succeeded in a large Phase III clinical trial and was used in combination with Merck & Co's "K drug," Keytruda. This is regarded in the field of oncology immunotherapy asmilestone breakthroughnot just the success of a single drug, but also interpreted by the market as validation of the feasibility of the "mRNA platform" in the cancer sector. Some institutions have even described it as the "Golden Age of mRNA."
It is worth noting that over the past two years, MRNA has been treated by the market as an "orphan after the pandemic bonus receded," falling into a prolonged slump after a deep correction. The company's P/E ratio is currently negative, and it is still operating at a loss.A narrative long abandoned by the market was suddenly reignited by a major catalyst. This is the classic breeding ground for an "explosive rally"—expectations are extremely low, so once they are met, the rebound potential is astonishing.
The second layer is the boost from macro sentiment. On the same day, the U.S. Treasury unexpectedly announced it would at least double the scale of long-term bond buybacks, $U.S. 30-Year Treasury Bonds Yield (US30Y.BD)$ the dollar index plummeted in a single day, falling below 99. The broad U.S. stock market also ended its three-day losing streak, with risk appetite recovering across the board.
On a day when investors were "willing to take risks," an asset with "significant inherent positive news" was naturally pushed to the extreme.Macro factors were the fuel, and individual stock positives were the spark; only when the two collided did they ignite this massive bullish candle.
Options side: A frenzy of exponential gains
(Design images shown on screen are for demonstration purposes only and do not constitute any investment advice or guarantee; market conditions change frequently, and the option prices depicted do not reflect actual trading prices)
Let's look at one of the most representative contracts—MRNA 260821 110.00CSpecifically, the call options with a strike price of $110 expiring on August 21.
Let's take a clear look at the situation of this contract:Its strike price was $110, while before the surge, MRNA's stock price was hovering around $62. In other words, this was a deep out-of-the-money "doomsday" contract with only two days left until expiration, practically written off by the market. What was its closing price the day before?Almost zero—approaching worthless.
Then, the underlying stock skyrocketed to $174 overnight, leaving the $110 strike price far behind. This contract instantly transformed from "waste paper" to "deep in-the-money":
The percentage gain column displayed a number so large it was hard to even pronounce—+64,629,900.00%。 Let's break down just how exaggerated that is:This equates to approximately 640,000 times.
Usually, when fellow investors talk about an option gaining "tens or even hundreds of times" in a single day, they already consider it outrageous; but here we have640,000x—For example, if you had used1 US dollar$1 yesterday to buy a contract that was nearly worthless,Theoreticallythat $1 would have turned intoover $600,000 today!
But here’s a key detail: many people might fixate on those zeros without noticing:the trading volume for this contract was actually extremely low.
In other words, virtually no one was able to buy in at the "near-zero" price and successfully sell at the peak.From August 5th to August 18th, this option had zero trading volume.
That staggering percentage figure is more of a "theoretical price change" rather than evidence that "a large number of people actually made a 640,000x profit." The "hundreds or even thousands of times returns" on call options flooding your screen last night were mostly deep out-of-the-money, near-expiry contracts that were nearly worthless. They were abruptly saved by a massive bullish candle, despite having almost no trading activity under normal circumstances.
From another perspective, this is a mathematical inevitability of "starting from near zero": when the denominator approaches zero, even a tiny numerator will cause the percentage to skyrocket.
Let me emphasize this point: such astronomical gains precisely illustrate the double-edged nature of deep out-of-the-money, near-expiry options.Under normal conditions, these options are all but certain to expire worthless—their time value drains away day by day like the last few grains of sand in an hourglass until it hits zero. However, if the underlying asset experiences a gap-level shock, those remaining grains can suddenly fill up an entire bag.What you earned wasn't really "the option increasing thousands of times in value"; rather, you profited because a low-probability event happened to hit the nearly expired lottery ticket in your hand.
How should we view this frenzy? — As a lesson in probability.
Seeing others get rich overnight inevitably stirs up mixed feelings.
I’d like to share a famous quote with my fellow investors, which comes fromHoward Marks— He is the founder of Oaktree Capital, one of the world's largest distressed asset investment firms, and is renowned for his periodic "memos" to investors, each word of which is insightful.
Warren Buffett has publicly stated on multiple occasions that he enjoys reading his memos, even saying, "Whenever I see a memo from Marks in my inbox, I open it immediately."
Such a heavyweight figure once said:
"There is nothing so disturbing to one's well-being and judgment as to see a friend get rich."
(Nothing disrupts one's peace of mind and judgment more than seeing a friend strike it rich.)
This quote is worth pinning to every options trader's screen.Seeing others turn a $10 call option into thousands of times its value makes it easy to lose rationality, start fantasizing that "I'm next," and then throw hundreds, thousands, or even tens of thousands of dollars chasing last-day options.
But we need to calmly calculate the probabilities—this is actually a funnel that narrows at each stage:
Across the entire market, there arethousands of underlying assets,and you have to pick exactly the one that will explode;
Each underlying asset hasdozens of expiration dates,and you need to pinpoint the exact window when the event occurs;
Under each expiration date, there aredozens of strike prices,and you need to select the one that is out-of-the-money but not excessively far;
Of course, you also have tochoose between Calls and Puts;if you guess the direction wrong, the result is zero.
With these multiple filters stacked together, the probability of hitting the target is pitifully small.The call options that generated overnight fortunes last night were real, but they represent survivorship bias. What you don't see are the countless contracts bought by the same group of traders in the wrong direction or with incorrect expiration dates, which simply expired worthless. This isn't to say options aren't worth learning or trading, but rather it serves as a reminder:These extreme cases of "getting rich overnight" are for observation only, not to be replicated as a daily strategy.
Also, never forget that market trends never move in a straight line.MRNA pulled back more than 10% at one point during tonight's extended hours session.This means that if you didn't sell at last night's peak of $67, the value of the contracts you hold today could have shrunk significantly.
For highly leveraged options, pullbacks after a surge are amplified: a 10% drop in the underlying stock can cause your in-the-money calls to lose a substantial portion of their value. Fellow investors looking to chase the rally now must realize:You are buying into an asset where most of the positive news has already been priced in and volatility has been pushed to extremes. The risk of chasing highs is similarly amplified by leverage.
Summary: Miracles are worth admiring, but methodologies are what you can actually take away.
This night with MRNA has actually taught every fellow investor serious about learning options some solid lessons:
First, the most explosive rallies often come from low-expectation stocks that have been abandoned by the market but are suddenly ignited by positive catalysts. This isn't to say we should gamble on such miracles, but rather to remind us—The true value of options is allowing small capital to "express a clear view with limited cost."
When you are confident about an event (such as earnings reports, clinical data, or policy implementation), options allow you to participate with just the cost of a meal. Your maximum loss is capped at the premium paid, while your potential gains can be leveraged significantly.
Second, understanding "time value" and "moneyness" (in-the-money vs. out-of-the-money) is a hundred times more important than chasing multipliers. The star this time was a deep out-of-the-money contract nearing expiration, which is almost destined to expire worthless. If you had swapped the same amount of money for a contract with a longer time to expiration and a strike price closer to the current spot price, you might not have achieved a 640,000x return, but the probability of "surviving and gradually realizing profits" would have been much higher.
What beginners should practice most is not finding the next lottery ticket, but learning to judge "how much time is left on the contract, how far it is from the strike price, and how much of what I paid is pure time value."
Third, when seeing others get rich quick, the best response is not envy or jealousy, but to calmly calculate probabilities and manage your position size.Only by keeping each individual investment within a range where you can comfortably accept a total loss can you stay in the market long enough to wait for the opportunity that truly belongs to you.
Entering with a hundred dollars and gaining thousands—options indeed provide the possibility of leveraging small capital for big opportunities. Of course, high odds don't come for free; picking the right direction, timing, and managing position size are all essential. Understand first, then act. With the right rhythm, opportunities are never scarce. See you in the next review~
Not familiar with options basics? Study up before jumping in.
If concepts like "what is a Long Call" or "how to read strike prices" are still a bit fuzzy when you read this review, don't rush to place orders—take some time to solidify your fundamentals first. Here are some practical introductory resources compiled for you; we recommend saving them:
Finally, we’ve got a little perk for our fellow investors—feel free to claim it!Options Starter Pack
*This promotion is exclusively available to invited Hong Kong users. Click to learn more.Detailed terms and conditions of the promotion >>
Disclaimer
This content does not constitute an offer, solicitation, recommendation, opinion, or any guarantee regarding any securities, financial products, or instruments. The risk of loss in trading options can be substantial. In certain circumstances, your losses may exceed the initial margin deposit. Even if you place contingent orders, such as 'stop-loss' or 'limit' orders, there is no assurance that losses will be avoided. Market conditions may prevent these orders from being executed. You may be required to deposit additional margin on short notice. If you fail to meet the required margin within the specified time, your open positions may be liquidated. Nevertheless, you remain liable for any deficit balance in your account resulting from such events. Therefore, you should thoroughly research and understand options before trading, and carefully consider whether such trading is suitable for you based on your financial condition and investment objectives. If you trade options, you should familiarize yourself with the procedures for exercising options and handling expiration, as well as your rights and obligations upon exercise or expiration.
Risk Disclaimer: The above content only represents the author's view. It does not represent any position or investment advice of Futu. Futu makes no representation or warranty.Read more
Comments (5)
to post a comment
28
73