It's been a record-breaking run for biotech stocks, with the Nasdaq Biotech ETF, the IBB, up 18 percent this year alone and nearly 300 percent in the past five years. But that extraordinary run has one trader running to the options market to buy protection.
"Given the outperformance of the biotech sector over the past few years, I'm looking for ways to profit from a potential pullback while limiting losses if IBB shares continue to rally," said Susquehanna's head of derivative strategy, Stacey Gilbert, on Tuesday's "Trading Nation."
What worries Gilbert most is the sector's outperformance to the broader market. "One of the periods I want to draw attention to is last March through the beginning of April when IBB shares saw an over 18 percent pullback as investors became nervous of higher-beta, momentum names," said Gilbert. "This compares to the broader market [pullback] of just over 2 percent."