Please ensure Javascript is enabled for purposes of website accessibility

Why Endocyte, Inc. Stock Briefly Spiked Today

By George Budwell – Dec 4, 2017 at 3:48PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Endocyte's stock got a temporary lift from a flurry of options trading today.

What happened

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.

A positive chart turning negative drawn on a chalkboard.

Image source: Getty Images.

So what

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.

Now what

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.

George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.