Shares of biotech play CTI BioPharma Corp (CTIC) have soared over 100 percent in the past year. One trader sees shares giving up some of those gains in the weeks ahead.
That’s based on the October $6.00 put options. With 45 days until expiration, 8,012 contracts traded compared to a prior open interest of 109, for a 74-fold jump in volume on the trade. The buyer of the puts paid $1.03 to make the downside bet.
The stock recently traded for about $6.50, so shares would need to drop about 10 percent for the option to move in-the-money. The stock has a 52-week low close to $1.50, so such a drop looks reasonable in the weeks ahead given current market conditions.
Action to take: Biotech stocks can be volatile, and also tend to rally or drop with the overall market. Shares of CTI have been even more prone to quick jumps higher or lower than that, and the stock appears to be coming off a move higher.
Interested investors in the blood-cancer therapy company should look to buy on a big drop lower rather than chase shares higher.
For traders, the October puts are a bit expensive, but a quick drop in shares could lead to a fast mid-to-high double-digit return in the coming weeks.
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.