FDA Sparks PTC Therapeutics, Inc. (PTCT) Selloff, Options Rush

PTC Therapeutics, Inc. (PTCT) is the worst performer on the Nasdaq today

by Alex Eppstein

Published on Oct 17, 2016 at 10:58 AM

Biotech PTC Therapeutics, Inc. (NASDAQ:PTCT) is today's worst stock on the Nasdaq, down 30.4% at $9.23. The shares are plummeting after the U.S. Food and Drug Administration (FDA) denied the drugmaker's appeal for its previously rejected Duchenne muscular dystrophy (DMD) treatment -- though the company has already said it will escalate its appeal to a higher FDA level. Amid this technical drubbing, PTCT options are trading at a rapid-fire rate.

With the stock on the short-sale restricted (SSR) list, it's no wonder intraday put volume is accelerated. Specifically, the options are being exchanged at seven times the expected rate for this point in the session. Overall, the pace of PTCT options trading ranks in the 96th percentile of its annual range, though volume remains fairly light on an absolute basis.

The stock's technical bloodbath could be burning a recent crop of option bulls. Specifically, over the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 1,229 PTCT calls versus just nine puts.

On the other hand, short sellers find themselves in a strong position. While PTCT is SSR today, already more than one-quarter of its float is sold short. In fact, it's possible some of these bears were actually behind the recent rush toward long calls, as shorts may have scooped up calls to hedge their positions against an unforeseen rally.

Technically speaking, sharp losses are nothing new for PTC Therapeutics, Inc. (NASDAQ:PTCT) shares. Year-to-date, the biotech stock has slid nearly 72%, and is now testing its 80-day moving average -- which hasn't been breached on daily closing basis since early August.

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