Happy Friday!

I know, I know, it’s not Friday.

Friendly reminder: tomorrow is Good Friday, and the stock market will be CLOSED.

The market might be closed tomorrow, but the teaching never stops. So to my members, keep an eye out for exclusive content because I won’t leave you hanging tomorrow. 

I often talk about how much I love trading small-cap biotech stocks.

The upcoming catalysts, the volatility, and potential outlier moves are just a few reasons I love them so much.

It’s not all sunshine and rainbows, though, gang.

The intraday offering announced yesterday in LIXT is a prime example of a risk of trading small-cap biotech stocks.

LIXT shares rose higher in the morning after the company announced promising preclinical data. 

With the positive news and pullback from the pre-market high into the opening bell, I got long for a momentum move higher at $2.52.

I sold shortly after at $2.73 for an 8.33% win.

While I had a long trade in the stock, I voiced my concern to my members LIVE on camera in the chatroom.

And this leads me to…

How I Avoided Getting Stuck Long into An Offering

Shortly after closing my long position, I told my members that I wouldn’t look to hold a position for too long or even rebuy because I believe this stock has enormous offering potential.

By doing some digging into the company on biopharmcatalyst.com, I mentioned live on camera that this company had a small number of months left of cash (before the offering), a high burn rate, and dilution readily available. 

This led me to believe that LIXT might look to take advantage of the higher gap and increased liquidity to announce an offering.

I also saw on the SEC website that the company already has dilution in EFFECT by way of an ATM (At-the-Market) offering, and they still had an effective shelf that they could tap.

And lone-behold, the company announced an offering during the session yesterday, which caused the stock to plunge lower.

The Bottom Line

When it comes to small-cap biotech stocks, understanding the risks involved in trading or investing in them is essential.

The offering risk is one of them, and a big one, in my opinion.

As a result, I often speak to my Biotech Breakout members about key concepts and terms relating to offerings.

I’m certainly more proud that I could point out the potential for an offering versus the long trade I made in the stock because understanding the fundamentals potentially saved me $$.