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Many traders and investors dream about making consistent profit on the stock market. Typically, investors would turn to fundamental analysis for mediu

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

m to long term capital gains while traders would try to time the market using technical analysis to spot reversals or advantageous entry point and exi

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

with the first sign of trouble. Unfortunately for everyone, the stock market is a zero-sum game. What this means is that for you to profit someone el

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

e would have to lose. The market exchanges acts like a distribution center of wealth. Essentially, without knowing, many novice investors and traders

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

re actually trading against the professional and institutional traders. Who do you think will win most of the time? The answer is obvious. Credit Spre

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

ad is one of the lesser known trading strategies available to the options trader. This strategy is call “credit spread” because you actually collect y

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

ur target profits upfront or a credit when you enter into a credit spread position. Credit spreads are directional plays – bull or bear. The bull spre

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

d is called Bull Put Spread while the bear spread is known as the Bear Call Spread.

The Credit Spread Option Trading Strategy can be constructed to b

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

a low risk investment vehicle. Using this strategy, we are able to use time decay in Options prices to our full benefit. Time decay works towards our

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

advantage the closer it is to expiration. With this in mind, time can very well be our ally in our quest for profit. We just need to know how to use

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

ime to help us.

Fact - about 80% of all options expire worthless, it makes sense that serious and long term investor should only be writing credit sp

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

eads for a living.

How do we profit from Credit Spread?

Assuming that we are writing a Bull Put Spread:

If the stock moves upwards, we make money.<

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

r> If the stock moves sideways, we make money.
If the stock moves lower, but is above the strike price that we sold our puts, we still make mone

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

y.

I don't know about you, but any trade that lets you earn a full profit when your stock moves higher, when it moves sideways, or even when it moves

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

lower enhance your winning probability. Credit spread writing is a powerful trading strategy because, if written correctly, it provides room for error

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

and you would still profit even though you are wrong.

The closer it gets to expiration (most of the time 3 rd Saturday of the month), the better it i

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

for us. We make money using the passage of time. Many seasoned credit spread traders like to view the 3rd Saturday of the month as their pay day.

Th

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

e biggest problem in Stock Options Trading is the race against time. More than 80% of options expire out-of-money or, in simpler terms, expire with no

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

value. If you bought options, this means you would have lost all your money in the trade. So with this fact in mind, use an Options Trading Strategy t

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

at would put you on the other side of the table. And that is to use a time profiting trading strategy called Credit Spread.

Copyright 2005 William Ta

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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