Speculating vaccine stocks.

Let's start from the beginning,

With conversation I had with a friend of mine.
Feb 28th
Camille: "Are you involved in the stock market?"
Me: I responded as I normally do, with my Robinhood handle (http://join.robinhood.com/lazaqum). Because, with Robinhood, if I invite some to join the platform, I get a free stock, and that person I invited get's a free stock. It's a win/win.
The next day, Camille had already setup her Robinhood account, got her free stock. I think, i never confirmed. But here we were. Studious as she is, she sends me an article, "list of 10 tech stocks to by in a coronna-virus plagued market by Jim Cramer". She also sends me a second article "10 medical stocks Amid the coronavirus outbreak".
One of those stocks was Moderna ($MRNA) trading somewhere between $26 to $28
On March 2nd, After doing doing a little reading on Moderna, I responded to Camille saying,
"My assessment is that it's too early for Moderna." - Because at this point Moderna was still in Phase 1, the first step of Clinical Trials. Moderna had not even announced the full outcomes(Positive or Negative) of it's Phase 1 study. Phase II would be the second phase of testing which takes several months, then there's Phase III (which also takes several months but with a much larger testing sample group compared to Phase II), and then finally FDA approval. To my point earlier, it was too early in the vaccine development stage to speculate
Camille responds: "Hmmmm. Okay fine"

Moderna jumps

Fast Forward a couple of weeks to April 3rd, the stock had risen to $34.08. Again, I was still skeptical. Not only because of the time it would take to develop a vaccine... a lot can happen between Phase 1, and FDA approval. There was a lot of media coverage of Moderna, now that I look back, media spotlight on this pharmaceutical company is one of the catalysts the stock price jumped so high in such a short time.
On April 18, the stock was trading at double it's February Price at $48.70. Moderna had recieved $483 million in federal funding to develop a corona-virus vaccine. At this point I'm still skeptical, but on the flipside, this is the federal government handing out almost $500 million to company to support it's vaccine development efforts. So you have to believe that there is some level of credility here.
At this point in the story, and this will be a lesson learned later. The only statistical research I'd done was to look at the Moderna's 2020 Q1 earnings. An earnings per share ($ -.37) didn't quite give me the assurance that this stock was a winner. I stayed clear of the stock for the most part but I'd check on the stock's price every other day to affirm my intuition. May 18th, $MRNA is trading $86.75...What I'm I missing??

In walks Novavax

Then all of a sudden here comes Novavax ($NVAX). Some time earlier this year, Novavax announced that it was working on a corona-virus vaccine but I didn't make much of it. Why, because here comes another opportunistic company trying to ride the corona virus wave. I left it there. Novavax $NVAX was trading at around 22$ in mid to late April.

Wait, I think i've seen this before

Similar to Moderna, it was announced on May 11th, Novavax got close to $400 million from private funding to support it's vaccine development efforts.
The Calculus here, which is not really a calculus but more of a trend. Some pharma stocks have jumped on news they were either are working on a corona virus drug, vaccine, or testing. We have seen this with Gilead $GILD, Co-Diagnostics Inc $CODX, Moderna $MRNA. Novavax $NVAX would not be any different.

The play, my play that is.

On May 11th, $NVAX traded at $24.50. On May 12th, the day after Novavax's private funding announcement, $NVAX jumped to $39.82. Wait, I've seen this trend before. In my mind these stocks might as well had been carbon copies of each other with different tickers. Here are the similarities I noted,

• Both companies had not made a profit yet both companies were receiving massive media coverage. It's almost as if the hopes of an entire nation lay on these companies to develop a vaccine against a deadly pandemic.
• Another very important factor I noted, both companies have received signifcant funding to back their vaccine development efforts. And On this news, both stocks had jumped significanlty

So On May 12th, I spent $400, bought a call-option with a strike-price of $40 that would expire May 22nd. I figured I could ride the wave, seeing how $MRNA had skyrocketed just weeks before.
One thing that was working against my hedge was the 2 week timeline. If my call-option was below 40$ after the expiry date of May 22nd, it would be worthless. I'd go from $400 to $0. I know, gutsy. But I believed my play, so I set an exit point. Soon as Novavax hits $50, I told myself I was jumping ship.
May 14th, $NVAX is trading at $38.52. If you're like me, you check you stocks about 3 times an hour during trading hours. So I keep on checking, and nope. Nothing, no movement in the right direction. I start to question if I'd missed wave. No surfs, but I was committed. May 18th comes around, $NVAX's stock blasts passed $50 dollars, by the time i checked, $NVAX is at $52. Guess what I did? Exactly. Cashed Out! I sold my option for $1234, a solid profit of $823. Splendid!.

Before we go, some lessons learned

• Please do more research on a companies position/financials than what i did. I'll be sharing some notes on how to do this in the future.
• Monitor a stock for sometime, see how it moves, see how investors react to the stock, how news, good or bad affects the stock. Big Swings, small swings? Big Swings, more risk, greater reward also comes greater chance for loss, small swings, nominal gains, nominal risk. Be obsessed
• There's value in Optimism. In this case-study, the potential for a vaccine developed by Novavax, or Moderna or whichever company would be at least 1 year to completion. With the aforementioned stocks not having made profit from previous quarters, we can assume that Investors are banking on the hope that 1. One of these companies will succeed in developing a vaccine 2. Whichever company succeeds first, there will be so much anticipated demand for the vaccine that it would drive up the company's revenues, and that company's stock price by association. Based on your risk profile you should be able to assess the value-add proposition or lack there of.
• Have an exit strategy. Always. In Particular when working with extremely risks assets. Set some stop-loss triggers, sell when you reach your target, adjust your strategy as you get more information

Some Terminology

• Stock-Option: A right but not obligation to buy a stock at a speficied price called the strike-price
• Call-Option: A right to but not an obligation to buy a stock if the stock goes above a specified price
• Earnings-Per-Share (eps): A value used by reported by a company, divided by the number of outstanding shares for that company. But don't quote me here. Many values can be used by a company to be classified as Earnings. A negative value of eps, means that more than likely that company recorded a Net Loss. Again, don't quote me here. You get the gist.

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