Sell 200 JAN 7.5 strike Calls at 1.10 = $(22,000)
Buy 100 JAN 10.0 strike Calls at 0.50 = $5,000
Initial Trade P&L = $2,500 Debit This is a JAN expiration Call Butterfly (long.) Total risk is defined and equal to $2,500 and occurs if Amicus shares trades below $5 and above $10 by Jan. 19 expiration. The trade breaks even at $5.25 per share and $9.75 per share. Maximum return is $22,500 if Amicus shares hit $7.50 by expiration, which represents a risk/reward of 9 times. Pelz has no position in Amicus. To learn more about using options to trade biotech stocks, check out Tony Pelz's book, The Biotech Trader Handbook or subscribe to Chimera Research Group.