Trial by knife

  • BCYC fell more than 50% in 3 days after releasing clinical trial results
  • Stock hit lowest price in more than a year on Wednesday
  • Some put premiums jumped more than 1,750%

To some people, the recent activity in Bicycle Therapeutics (BCYC) may simply illustrate the biotech space’s reputation for volatility—but it also offered some insight into the ways that volatility plays out in the options market.

The stock popped up on multiple LiveAction scans over the past week, including biggest percentage gainers, biggest percentage losers, unusual options volume, and biggest historical volatility gains.

The price chart leaves no doubt as to why. Last Friday (April 8), BCYC jumped 24.5% after a three-day, 16.4% sell-off. This week took things to another level, as the stock tumbled 38.7% on Monday, 13.6% on Tuesday, and 13.5% intraday on Wednesday:

Chart 1: Bicycle Therapeutics (BCYC), 1/22/21–4/13/22. Bicycle Therapeutics (BCYC) price chart. Falling knife.

Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)

In total, BCYC shed 54% in three days before bouncing off Wednesday’s low of $21.53 to trim the day’s loss to less than 4%. And this “falling knife” sell-off occurred after the stock had already pulled back nearly 25% from November’s all-time high of $62.08.

Not surprisingly, the recent volatility unfolded as the company released clinical trial results for one of its flagship cancer treatments, which reportedly met many of its targets but may have disappointed in terms of improving on the performance of competing therapies.1

That’s the nature of the biotech/biopharma industry—setbacks are as much a part of the landscape as breakthroughs. Regardless of how this news shapes BCYC’s longer-term picture (as of yesterday, the average Street analyst target was $65.572), it definitely jolted BCYC’s somewhat sleepy options market. For example, the roughly at-the-money May $22.50 calls, which hadn’t traded before Tuesday, fell 37.5% to $3 Wednesday morning—nearly three times as much as the stock’s percentage decline:

Chart 2: BCYC May $22.50 call, 4/12/22–4/13/22 (5 min.). Bicycle Therapeutics (BCYC) options price chart. Calls discounted.

Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)

The change in the May $22.50 put was even more dramatic on a percentage basis. On April 8, the option closed at $0.17. Yesterday it tagged $3.20—an increase of around 1,780%—before pulling back:

Chart 3: BCYC May $22.50 put, 4/8/21–4/13/22 (5-min.). Puts at a premium.

Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)

Clinical trial results are similar to earnings in that options implied volatility often surges before them and falls after the news (or, after the price move triggered by it). Regardless of whether a stock rebounds quickly (or at all) from a sharp sell-off, the impact these types of moves can have on implied volatility and options prices can be as fleeting as the stock moves themselves.

In other words, traders interested in selling potentially overpriced options often look for possibilities when the volatility “storm” is still in effect, while traders looking to buy options often wait for calmer conditions.

Market Mover Update: Netflix (NFLX) snapped its six-day losing streak on Wednesday. Earnings are due next Tuesday (see “Earnings—before and after”).

June WTI crude oil futures followed up on Tuesday’s 6% rally with a 3%-plus gain yesterday, pushing to $104/barrel intraday and closing at their highest level in nearly three weeks.

Market Holiday Reminder: US stock and futures exchanges will be closed tomorrow in observance of Good Friday.

Today’s numbers include (all times ET): Weekly Jobless Claims (8:30 a.m.), Retail Sales (8:30 a.m.), Import and Export Prices (8:30 a.m.), Business Inventories (10 a.m.), Consumer Sentiment (10 a.m.), EIA Natural Gas Report (10:30 a.m.).

Today’s earnings include: Rite Aid (RAD), Taiwan Semiconductor (TSM), Wells Fargo (WFC), PNC Financial Services (PNC), Goldman Sachs (GS), Morgan Stanley (MS), Citigroup (C), U.S. Bancorp (USB), UnitedHealth (UNH).


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1 Bicycle Therapeutics Announces Interim BT8009 Phase I Clinical Trial Results at the 2022 AACR Annual Meeting. 4/11/22.
2 Bicycle Therapeutics Stock Forecast & Price Targets. 4/12/22.

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