On Friday’s Options Action, the crew analyzed the performance of the biotech sector. Large cap biotech stocks have underperformed small cap over the past few years and started to show signs of outperformance lately. Many of the larger cap biotech names have very cheap valuations and have bottomed over the past few weeks. Coupled with the bullish channel on IBB suggests a bounce higher to the upper trendline. Expecting IBB to trade higher, Michael Khouw suggests buying a July 103/110/117 Call Vertical Risk Reversal for a $1.25 Debit. As of Friday’s close, this spread is trading at $1.60.
We’ve structured this trade in OptionsPlay so you can analyze and view this trade along with the supporting technical chart at your convenience. You can also view the Options Action’s video by clicking on the following link: IBB Options Action