Bears target Incyte before FDA ruling

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Incyte is waiting for a major drug approval, and the bears are sharpening their claws.

optionMONSTER's Depth Charge tracking system detected the purchase of about 1,500 December 10 puts against open interest of just 142 contracts. Premiums rose from $0.70 to $0.80 as the trades crossed, which indicates a strong buying pattern.

INCY fell 0.83 percent to $13.21 yesterday and has lost one-third of its value in the last six months. Investors are waiting for approval of its ruxolitinib compound, which is used to treat the bone-marrow disorder known as myelofibrosis. Management said it expects the Food and Drug Administration to make a decision by year's end.

The stock rallied about tenfold between early 2009 and May 2010. Since then, however, it rolled over and is now consolidating below its 200-day moving average.

The December 10 puts are significantly out of the money and won't turn a profit unless INCY suffers a major drop. Given the importance of the FDA decisions, small drug makers often move in excess of 50 percent when news comes out.

Overall option volume in the name was 11 times greater than average in the session, according to the Depth Charge.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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This article appears in: Investing , Options


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