The Biotech industry is a rapidly growing sector in the US. These stocks are often affected by announcements surrounding new discoveries and FDA approvals – high volatilities are often observed. On average, Biotech stocks are significantly more volatile than the S&P 500 as clinical trials can create surprises which can create large movements in price.
Today, Tom Sosnoff and Tony Battista take a deeper look at the Biotech sector and some of the larger components that make up some of the major ETFs. Since we are primarily premium sellers, the guys look to see how often Biotech stocks stay within their expected range. They find out that even though the underlyings typically tend to stay within their expected range, the large moves that are attributed to clinical trials have the potential for large losses so we typically avoid selling premium in these underlyings!
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