One trader’s very contrarian pharma trade

Contrarian biotech play

The American Society of Clinical Oncology's annual meeting starts Friday, an event that tends to be a big driver for biotech and pharmaceutical stocks. But for Cowen's head of equity sales trading, David Seaburg, the big opportunity is to wait for the stocks to fall after the event, and then to snatch them up.

Drug stocks "tend to settle out somewhere around the date the meetings begin," and then lose their steam, Seaburg said Tuesday in an interview with CNBC's "Trading Nation." "So there could be an opportunity on any pullback, if history repeats itself, to buy some of these names."

"It could be an opportunity to jump back into a space that has superstrong fundamentals," he added.

Pharmaceutical and biotech stocks have risen 7.4 percent and 9 percent this year, respectively. Both industry groups are up some 2.5 percent in the past month.

Looking at the options, Susquehanna's head of derivative strategy, Stacey Gilbert, says that in the iShares Nasdaq Biotech ETF (IBB), traders are expecting a 4 percent move over the next week.

Since "there is some volatility already being priced in," for traders who want to play the event, it might make more sense to use options on individual names such as Merck, she said.

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