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.
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.