Shares of biotechnology company Altimmune (ALT) are up 28 percent over the past year, but are also up nearly four-fold from their 52-week lows. One trader sees shares giving back some of their recent gains.
That’s based on the October $13 put. With 42 days until expiration, 6,077 contracts traded compared to a prior open interest of 104, for a 58-fold surge in volume. The buyer of the puts paid $1.70 to get into the trade.
The stock recently traded around $20, so it would need to lose $7, or about 35 percent, for the option to move in-the-money.
The company is an early-stage player working on treatments for obesity and liver diseases. As an early stage biotech company, the firm is burning through sizeable amounts of cash, and has two quarters left of cash at its current rate. The company may need to sell shares to raise capital, which could lead to a lower price.
Action to take: The company has moved notably higher in the past few months, and the company just had a nasal Covid-19 vaccine spray put on hold by the FDA. That suggests that interested investors may get a better price on shares in the coming months, following their massive rally.
For traders, the October puts are aggressive, given how little time is left on the trade. But that also reflects how volatile the shares can be on a daily basis. Traders can likely grab mid-double-digit gains in the coming weeks on a drop in shares.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.