by Gavin M.
Before I start, let me be clear. I have been trading for 13 years now. However, I am not the resident expert in biostocks. I did not build my career trading biostocks. I maybe dabble in 2 or 3 biostocks each year and I always trade them from the sell side. As far as success with them goes, you can look up all my tweets on ACAD or VVUS.
Everybody loves making money quickly and with the least amount of capital possible. Biostocks offer brazen investors and traders the chance to do so. If you look at the biotech index, it is up north of 300% year over year and it is not a shock that wall street loves this sector to speculate on.
However, not every biostock yields what it promises. I am sure you have seen some pump and dump schemes happening to biostocks and people can make money in a relatively short period of time in those. But the biostock world in general has severe dangers. Most companies fail. To add insult to injury, most investors' funds are stuck waiting for that time when a company's drug or treatment finally shows promise.
I took a short today on DYAX. I could be wrong and it could be up huge tomorrow or next month or next year. Inherent in all of these biotech stocks is the promise of a drug that could make them so much money. But until that golden day, they continue to sit on loans and private investor money. DYAX is one of those stocks that I find quite intriguing. It has gone up so quickly on little merit. I am aware of the news but it is just funny how the stock is up huge on something so little. I think this attests to the ridiculous risk taking people in the markets are doing right now. Hanging on every word by the FDA is not a conducive investment thesis. When you purely rely on an entity that can render a binary judgment on a stock you own, that is not investing. It is not even trading. It is purely gambling.
Everybody wants to a millionaire overnight. Everyone wants to get in on the action because they have a tremendous fear of missing out (FOMO). In the end I think that biotech remains a hugely speculative space where the zero sum game is much more dangerous than the other markets. It is for the same reason why my niche is in the other sectors of the markets because they make more sense and they have given me the ability to make money consistently.
I did not make money in this business by gambling. I made my money by finding areas in the markets that make sense to me as a trader and that made me money consistently. But in the end, to each his own. :)
Traders from Equity Sense will be writing on this blog on positions and other market-related things.