Moderna; In Case Retail Investors Have Gotten Ahead Of Themselves

Image via Moderna

Another Big Day For Moderna

Shares of Moderna (MRNA) spiked 20% Monday on news it had requested FDA clearance for its COVID-19 vaccine. Both Bloomberg's Joe Wiesenthal and Julianna Tatelbaum wondered why though. 

After all, Moderna announced its vaccine was effective two weeks ago; who didn't expect them to seek clearance for it? 

Are Retail Investors Getting Ahead Of Themselves?

Tatelbaum suggested in the tweet above that retail investors were the ones bidding up Moderna shares on Monday. We should note here that BMO Capital Research analyst George Farmer downgraded Moderna to "market perform" after the vaccine news two weeks ago, arguing that the COVID catalyst was already priced in:

We downgrade MRNA to Market Perform from Outperform and increase our target price to $109 on our view of limited upside from current trading levels following announcement of a positive COVE Phase 3 outcome. We believe a near-term best-case scenario is mostly reflected in shares including an mRNA-1273 EUA before year-end and full approval mid-2021. Although we recommend taking some profits, we think, nevertheless, that the now proven potential of MRNA's RNA/LNP platform establishes the company as a new vaccine development powerhouse.

Since Farmer wrote that, Moderna shares were up another 68% as of Monday's close. 

Chart

Data by YCharts

Locking In Moderna Gains

The obvious way to lock in Moderna gains if you've been long the stock is to take profits here. If you'd rather stay long and try to get more gains, you can hedge. I tried hedging 100 shares of Moderna against a greater-than-20% decline over the next several months two ways: ones with optimal puts (uncapped upside) and once with an optimal collar (capped upside).

Uncapped Upside - Unavailable

On Monday, if you scanned for an optimal put to hedge Moderna against a >20% drop over the next 6 months, you would have gotten this error message.

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