Catalyst Risk Calculator
Enter a biotech catalyst setup. Get expected value, position-size recommendation, and risk-adjusted return. The math pros use, made simple.
Your catalyst setup
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Typical: Phase 2 +50-150%, Phase 3 +30-100%, PDUFA +10-50%
Typical: Phase 2 -40-70%, Phase 3 -50-80%, PDUFA -30-70%
How this calculator works
The expected value calculation is: EV = (POS × Upside%) − ((1−POS) × Downside%). Probability of success (POS) is estimated using base rates by clinical phase and indication, adjusted for your view of trial design quality.
Position size is calculated using a modified Kelly criterion: max risk = your selected % of portfolio. The recommended position is sized so that the worst case (catalyst miss) does not exceed your max risk threshold.
FAQ
- Where do the base rates come from?
- Phase-by-indication success rates are sourced from BIO/QLS/Informa industry studies. Updated annually; current rates: oncology Phase 3 ~50%, CNS Phase 3 ~20%, rare disease Phase 3 ~60%, etc.
- Why does this not account for stock IV / options pricing?
- This calculator gives the underlying expected value of holding the stock through the catalyst. Options pricing layers on top — IV pumping near catalysts often means options are EV-negative even when underlying stock is EV-positive.
- What if the EV is negative?
- Don't take the trade. Wait for a setup with positive EV. Patience is the highest-EV strategy in catalyst trading.
- Should I always position-size at the max risk threshold?
- No — only when you have high conviction. For lower-conviction setups, take half-size positions. Save your max-size positions for setups where you have a real differentiated view.
Educational only. Not investment advice. Biotech investing carries substantial risk; consult a licensed financial advisor before making investment decisions.
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