Pricing in the unexpected

  • ALNY options volatility climbed while stock consolidated
  • Shares have moved sideways for nearly four months
  • Feb. sell-off may explain recent IV increase

Volatility and the biotech space are joined at the hip in many investors’ minds, but on Wednesday Alnylam Pharmaceuticals (ALNY) highlighted a different aspect of this relationship.

ALNY wasn’t the only biotech/pharma name on the LiveAction scan for high 30-day implied volatility (IV), but it was one of the minority of stocks that were trading above $10:

Chart 1: LiveAction scan: Highest 30-day implied volatility, 6/12/24. Options market expects volatility.

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

While IV represents the options market’s forecast of future volatility, ALNY also differed from many of the other stocks on the scan in that it hasn’t been particularly volatile recently—in fact, it’s been trading more or less sideways for the better part of four months. After falling to $142.52 on February 15—its lowest level since early August 2022—ALNY tagged $160.04 a few days later. It hasn’t traded above that high since, despite rallying more than 7% over the past four days:

Chart 2: Alnylam Pharmaceuticals (ALNY), 1/4/24–6/12/24. IV climbed despite stock trading range.

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

But notice that while the stock’s historical volatility (HV) hugged multi-month lows for most of this period, its IV climbed steadily, recently hitting new highs for the year.

That suggests the options market’s volatility expectations for ALNY have been ratcheting higher, even though the stock hasn’t done much the past few months. Why? Earnings aren’t the culprit—the company last released numbers on May 2, and isn’t scheduled to do so again until late July.

The answer may be found in the stock’s 10.2% sell-off on February 15—the gap-down move that defined the lower boundary of its current consolidation. On that day, the company announced it was restructuring the clinical trial of one of its flagship heart-disease therapies. It was a move that, right or wrong, may have raised questions about the drug’s viability, while delaying test results—which had been expected earlier this year—until late June or early July.1

In other words, the company appears to have a lot riding on the outcome of the upcoming trials. And the options market has been pricing in potential volatility, even as the stock has kept a relatively low profile.

Market Mover Update: On Wednesday, open interest in the Incyte (INCY) June $75 calls and puts stood at 12,200 and 12,000 contracts, respectively, which means traders were increasing their positions in these contracts on Monday. But there was also volume of around 12,000 in both contracts yesterday (see “Trading price direction or volatility?”).

Today’s numbers include (all times ET): weekly jobless claims (8:30 a.m.), Producer Price Index (8:30 a.m.), EIA Natural Gas Report (10:30 a.m.).

Today’s earnings include: Ciena (CIEN), G-III Apparel (GIII), J.M. Smucker (SJM), DocuSign (DOCU), Rent The Runway (RENT).


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1 FiercePharma. Alnylam changes analysis plan for key Amvuttra heart trial, jolting investors. 2/15/24.

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