Options Eye Alzheimer's, GM, AmeriCredit
Options are eyeing the drug sector's Alzheimer's treatments, according to one observer.
"There haven't been a lot of bright spots in the market this week, but developers of Alzheimer's drugs have gotten particular attention, and that's been a very optimistic story, on news that Elan and Wyeth had experienced promising signs for trials of their drug, but I think that the real way to play this sector is in Myriad Generics, which has a drug under development called Flurizan, which has just finished Phase III trials, and they are due to release data on that drug over the next week or two," Rebecca Darst of Interactive Brokers said on CNBC's "Squawk Box." "There's not a specific date for that release, but we expect that it's going to coincide with the July options contract. Interestingly, there's potentially a $20 million market for Alzheimer's drugs, and, really, the sector is banking on these selective amyloid-lowering agents, which treat the causes rather than the symptoms.
"Myriad is further along than any other company in this regard, but what we've seen since mid-April in Myriad options is a gradual, slow, but steady, tripling in implied volatility in Myriad options. Now, implied volatility in all Myriad options now comes in at 114 percent. This is against 34 percent historic volatility on the stock, so this is a huge, huge level of anticipation in Myriad." (See her full comments in the video).
Darst also had some observations about GM .
"Impliued volatility in GM options is at a two-month high right now," Darst said. "If you compare the implied volatility reading on all GM options, it's at 69 percent versus about 47 and a half percent historic volaitility. What this tells us is that the options market is looking for 45 percent price risk to GM shares over the next 30 days."
In addition, she said, options are down on AmeriCredit as well.
"Anything having to do with cars/consumer credit is not looking real good. Implied volatility shows 54 percent more price risk to AmeriCredit shares over the next 30 days. Options trading at five times the normal level yesterday, and puts out-moving calls by seven to one."