Volatility signals in the “other” tech
- IMNM up more than 225% since April after multi-year decline
- Option volatility at highest level since 2023
- Clinical trial results expected by the end of the year
Volatility is nothing new in the biotech space, as a quick review of last week’s stock movers shows. Three stocks with share prices above $10 jumped more than 100% in a day, and the companies all had “bio” or “therapeutics” in their names.
That’s also often the case for the stocks appearing on various LiveAction volatility scans. On Monday, almost all of the individual stocks on the scan for highest 30-day implied volatility (IV) levels were biotech companies—including Immunome (IMNM), which was one of two trading above $10:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
To put these IV levels in perspective, NVIDIA’s (NVDA) IV was below 50 on Monday—just two days before its earnings release. IMNM’s IV is as high as it’s been since April 2023, and is more than twice as high as its historical volatility (HV). The stock also appears on the scans for high 60- and 90-day IV. In other words, the options market thinks the stock could make a significant move in the coming weeks.
On Monday IMNM rallied nearly x% to $18.xx, extending its rally from early April to around 23x%. As the chart shows, however, this impressive rally was preceded by an 80% decline from its March 2024 closing high of $27.24—and that high was nearly 37% below IMNM’s February 2021 record close of $43.24:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
One of the interesting aspects of IMNM’s high IV is that the company released earnings—an event that often results in higher IV—on November 7. That announcement was followed by a slightly lower close that day, but a 21% rally since.
As longtime traders know, earnings releases aren’t necessarily the biggest market-moving events for biotech stocks. That honor often goes to clinical trial results, FDA approvals (or rejections), and related “pipeline” events that can determine whether these companies can translate scientific research into viable businesses. For example, Cogent Biosciences (COGT) announced earnings after the close on Monday, but rallied +119% a week earlier after releasing successful clinical trial results.
As it turns out, IMNM is expected to release test results for one of its cancer therapies by the end of the year. That appears to be the source of its high IV readings.
One other thing experienced traders know: Extremely high IV levels—which reflect market uncertainty—often translate into inflated options premiums. That can make it very expensive for options buyers interested in trading a potentially large price move using “non-directional” strategies like straddles and strangles.
Today’s numbers include (all times ET): import and export prices (8:30 a.m.), industrial production (9:15 a.m.), Housing Market Index (10 a.m.), Factory Orders (10 a.m.).
Today’s earnings include: Dycom (DY), Home Depot (HD), Medtronic (MDT), Powell Industries (POWL), Williams Sonoma (WSM).
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