Signal in the biotech noise

So far this week, biotech stocks still appear to be riding last week’s momentum burst, when the industry made health care the S&P 500’s strongest sector.

On Tuesday, Ultragenyx (RARE), a biotech specializing in treating rare genetic diseases, was one of a handful of individual stocks trading above $10 that appeared on the LiveAction scan for high 30-day implied volatility (IV).

Although RARE rallied nearly 3%, that still left the stock well within the boundaries of its recent trading range—a pause that followed a 66% rally off the stock’s late-March record low and a subsequent 31% correction:

The bottom of the chart compares RARE’s IV and its historical volatility (HV)—forward-looking volatility and backward-looking volatility, respectively. There was a significant difference between the two: While HV was below 43—for perspective, a few points less than Caterpillar (CAT)—IV was close to 140.

The lower HV reading appeared to accurately reflect RARE’s nearly month-long consolidation, which only emphasizes the fact IV was nearly three times as high, and just a little lower than it was at the height of the stock’s July sell-off.

To help explain this apparent disconnect, let’s first review what IV represents—namely, an estimate of a stock’s future volatility (in this case, the next 30 days) derived from its options prices. Specifically, a reading of 139.40 means the options market is anticipating the stock could move 139.4% higher or lower over the next year. (Even more specifically, it means the options market is assigning a 68.3% to that range.) Because a stock can’t fall more than 100%, this translates to an expected range of $0 to $63.68 for RARE over the next year, using the stock’s price around 1 p.m. ET on Tuesday.

That’s quite a wide estimate—seemingly too wide to have any practical for most stock traders. But there is possible “signal” in this apparent volatility “noise.” As our discussion so far makes clear, high IV essentially translates into high uncertainty. In this case, given RARE has traded relatively quietly for the better part of month and doesn’t have an earnings announcement on the horizon until November, a valid question might be, “Why is the market so uncertain about the path of this stock?”

The probable answer: Ultragenyx is currently expected to release key Phase-3 clinical trial data for one of its therapies (GTX-102, for Angelman Syndrome) in September or October, and is also expecting an FDA review decision for another treatment in September.  

Traders wondering whether the upcoming clinical data could justify such high IV and uncertainty need only look back to December 30, 2025, when RARE tumbled 42% to a then-record low of $18.41 after disappointing trial results for a different drug. Recent IV levels simply reflect the possibly of another large move—up or down.

For their part, Morgan Stanley & Co. analysts maintain an Overweight rating on RARE, citing strong growth from one of its flagship therapies, Crysvita, while noting GTX-102 has the potential to generate even greater revenues, should it succeed in trials and FDA approval.

Market Mover Update: “AI bellwether enters key stretch” showed that over the past several years, NVIDIA’s (NVDA) net performance in the 10 trading days before earnings was stronger than the 10 days after. The pre-earnings part of the that equation wasn’t in evidence this time: Although today is the final trading day “before” earnings (NVDA announces after the closing bell today), through Tuesday the stock was down more than 5% from its August 13 close.

Today’s numbers include (all times ET): Mortgage Applications (7 a.m.), Q2 GDP, final estimate (8:30 a.m.), PCE Price Index  (8:30 a.m.), Personal Income and Spending (8:30 a.m.), Durable Goods Orders (8:30 a.m.), Retail Inventories and Wholesale Inventories, advance (8:30 a.m.), EIA Petroleum Status Report (10:30 a.m.).

Today’s earnings include: Agilent (A), Abercrombie & Fitch (ANF), Burlington Stores (BURL), Salesforce (CRM), CrowdStrike (CRWD), HP (HPQ), Kohl's (KSS), NVIDIA (NVDA), Okta (OKTA), J.M. Smucker (SJM).

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¹ MorganStanley.com. Gold’s Rapid Rebound. 8/20/26.