How should I adjust my risk management and position sizing for REPL in light of this development?

Risk‑management take‑away:

The filing of a securities‑class‑action lawsuit against Replimune (REPL) injects a fresh, negative catalyst that is likely to spark a short‑term sell‑off and increase price volatility. Historically, similar litigation announcements for small‑cap biotech names trigger 10‑15 % intra‑day drops and heightened VIX‑type moves in the stock’s 10‑day implied volatility (often spiking from 30 % to 60 %+). Because the lawsuit is now public and the lead‑plaintiff deadline is only weeks away, expect a sharp, short‑run risk premium that will compress the price‑action channel for the next 2–4 weeks. If you are currently long, you’re exposed to a “tail‑risk” that could erode a large portion of your position if a negative court or settlement news materialises. If you are short, the risk is a potential short‑squeeze if the company unexpectedly settles or the market discounts the lawsuit as non‑material.

Position‑size & stop‑loss guidance:

1. Reduce exposure – cut existing long exposure to no more than 1‑2 % of your total portfolio (or 0.5‑1 % of your equity if you trade with a fixed‑fraction approach). If you are already holding a sizable position (e.g., >5 % of your capital), consider halving the size immediately.

2. Tighten stops – set a hard stop roughly 6‑8 % below the current market price (or just below the nearest technical support on the daily chart) to protect against a rapid breach. For a short position, place a stop‑loss 6‑8 % above current price (or just above the recent swing‑high).

3. Use volatility‑scaled sizing – calculate the average true range (ATR) of REPL over the past 20 sessions; set your position size such that a 1‑ATR move does not exceed 0.5 %‑1 % of your portfolio equity. This will automatically shrink your position when the ATR spikes.

4. Consider hedging – if you wish to stay long for the long‑term pipeline, buy out‑of‑the‑money (OTM) puts (e.g., 30‑day, 10 % OTM) to cap downside, or overlay a protective collar (sell OTM calls) to fund the puts.

5. Monitor key dates – the lead‑plaintiff deadline (Sept 22) and any court filings are high‑impact events. Reduce position further or move to a full cash position a week before each event, especially if price approaches the 20‑day EMA or breaks below the 50‑day moving average.

Actionable summary: Trim your REPL exposure to a very small fraction of your portfolio, set tighter stop‑losses aligned with recent support/resistance, and scale the position down based on current ATR/volatility. If you wish to stay in the trade, protect the upside with a small put‑option hedge or a collar. Stay vigilant for any court‑related news releases; the first 2‑4 weeks post‑filing are the highest risk window. If you’re risk‑averse, consider exiting the position entirely until the litigation timeline resolves.