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Shares of the clinical-stage biotech Endocyte (NASDAQ: ECYT) briefly rose by as much as 16% Monday on more than double the average daily volume. The catalyst? Investors appear to have noticed a flurry of activity in the January 2018 option chain for both Endocyte's out-of-the-money Calls and Puts, implying that the stock may be gearing up for a sizable move.
As this activity wasn't accompanied by a material event, though investors -- or more likely day traders -- have since sold this "news." Endocyte's shares are currently down by 5.57% as of 3:30 p.m. EDT as a result.
Option chains can sometimes provide key insights into a stock's future movements -- especially when the volume ramps up one specific side of the ledger (Calls vs. Puts). Based on Endocyte's recent options activity, however, an investor appears to be engaging in a more complex options strategy such a so-called "iron butterfly" that isn't necessarily tied to a specific direction. As such, investors buying or selling Endocyte's common stock probably shouldn't read too much into this spike in activity in the company's underlying options chain.
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Putting Endocyte's options to the side for the moment, investors in this stock should remain squarely focused on the clinical development of the company's lead program, PSMA-617, for metastatic castration-resistant prostate cancer. The reality is that PSMA-617 remains several years away from a possible regulatory filing, and as such, Endocyte will need to raise a sizable amount of capital well before this transformational event. That's why I'm content to watch this intriguing clinical-stage biotech from the safety of the sidelines for the time being.
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