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Options Tuesday: Taking Profits Off of Moderna’s Tower of Terror

With COVID-19 vaccination programs rolling along, it might well be assumed that any stock tied to vaccinations is on a one-way trip higher.

Not so fast. There’s that whole thing about “assuming,” and I think you know what they say.

Take Moderna Inc. (NasdaqGS:MRNA) for instance.

After gaining as much as 165.9% from November 2, 2020, to December 1, 2020, an absolute rocket ride, the stock took a jaw-dropping dive, reversing as much as 42.48% over the next month.

That’s a frighteningly fast reversal for a hot company with a hot vaccine, and it should catch everyone’s attention.

Then, from January 4, 2021, to February 8, 2021, the stock jumped as much as 83.28%, only to fall back down hard, again, 35.11% over the next month.

Once again, that’s a big drop over such a short time frame.

It’s become something of a pattern, and not a good pattern if you’re “long” with the stock.

In fact, I think it’s a red flag.

Fast forward to now, shares of MRNA gained 36.22% from March 30, 2021, to April 30, 2021.

As I write this, the stock is trading at the top of its range. But I think we might be getting ready for another move to the downside.

In addition to the MNRA’s chart action pointing to this “pattern,” the company is scheduled to report Q1/2021 results prior to the market open on Thursday, May 6, 2021.

Any negative news could send shares cratering. Even good earnings and uneventful guidance could hit the stock.

One reason is, other than its COVID-19 vaccine, the company has no other candidates even near commercialization.

That means Moderna’s management might not have anything compelling to talk about other than its COVID-19 vaccine when it reviews Q1 performance.

And then there’s this news…

From March 12, 2021, to April 16, 2021, the company’s CEO, Stephane Bancel sold 161,276 shares worth approximately $22.53 million.

Why is the CEO selling so many shares right ahead of earnings? It could be nothing, but it caught my attention.

Speaking of C-suite execs…

The company just announced its CMO (Chief Medical Officer) Dr. Tal Zaks, plans to leave the company in late September, after six years at the company.

It’s just my opinion, but having to find a new CMO while the company is trying to combat a global pandemic seems like pretty bad timing.

When I look at the chart, at the stock’s trading pattern, factor in earnings on Thursday, consider the company has no additional commercialized products, consider the CEO’s actions, and think about a biotech company searching for a new CMO, I see a lot of things that could drag shares down once again.

That’s why this Options Tuesday I like buying an MRNA June 18, 2021 $165/170 Put Spread.

You could simply buy the MRNA June 18, 2021 $170 Puts, but they’re expensive, trading at $8.25 per share as I write this. On the other hand, you can pick up the $165/$170 put spread (buying the $170 puts and simultaneously selling the $165 puts) to lower your cost to approximately $1.75.

Based on those numbers, you’ll be risking $1.75 to possibly make $3.25, which represents a very favorable 1.85-to-1 reward/risk reward scenario.

That trade could work out very quickly if MRNA does what it’s done before. And in the event the stock explodes higher, you’ll only have risked $1.75 per contract.

Happy trading.

Before I go, I just want to remind you that I am taking questions about stocks, options, or recent trends for my weekly BS.H video that comes out every Friday!

Just shoot me your questions, or specific ticker symbols, to or drop me a comment online.

I look forward to hearing from you,

Shah Gilani

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