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Option Traders Call a Bottom for Amicus Therapeutics

FOLD traders are selling short-term puts

by 12/20/2012 1:50 PM
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The shares of Amicus Therapeutics, Inc. (NASDAQ:FOLD - 3.07) are floundering this afternoon, but it looks like a few options traders are gambling on a short-term bottom for the drug maker. Specifically, it seems investors are exploiting relatively pricey options premiums to bet on limited downside for FOLD.

So far today, FOLD has seen roughly 9,000 puts change hands -- about 38 times its average intraday put volume, and nearly three times the number of calls exchanged. Most popular has been the January 2013 2.5-strike put, which has seen more than 5,100 contracts traded on open interest of fewer than 400 contracts, pointing to an influx of new initiations. However, almost all of the puts crossed at the bid price, suggesting they were sold.

By writing the puts to open, the sellers are expecting FOLD to remain north of $2.50 through the next month. In this best-case scenario, the puts will remain out of the money through options expiration, allowing the sellers to retain the entire premium received at initiation. And, as alluded to earlier, the soon-to-be front-month puts are fetching an attractive premium at the moment. Implied volatility was last seen at 99.4% -- a steep mark-up to the stock's one-month historical volatility of 61.7%.

Prior to today's plunge, options traders were employing more traditional measures to wax optimistic on FOLD. During the past two weeks, speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open nearly four FOLD calls for every put. Plus, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.34 indicates that calls nearly triple puts among options expiring within three months.

At last look, the shares of FOLD have given up 46.8% to linger in the $3.07 region. Earlier in the session, the security fell as low as $3.05, after the company unveiled disappointing data regarding Amigal, its experimental drug to treat Fabry disease.


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