NEW YORK ( TheStreet) -- Sarepta Therapeutics (SRPT - Get Report) is slated to announce key data on the company's Duchenne muscular dystrophy (DMD) drug candidate eteplirsen at the International Congress of the World Muscle Society in a late-breaker session on October 13. Recent favorable press, momentum from a string of positive results, and speculation about the possibility of accelerated approval have catapulted the stock from $4 to over $16 per share over the past several weeks. On Sept. 4, Sarepta announced a $40 million at-the-market equity offering; shares subsequently sold off to around $13.
The October options, the expiration nearest to the late breaker session, currently imply an up or down move of around $7 per share (Sarepta could rise to $20 or fall to $6.) Traders wishing to speculate on an upside move face a high-risk proposition by buying equity and holding into the eteplirsen results. Bad data could potentially result in an immediate 50% loss or more on one's initial investment. An alternative (and I believe preferred) approach is to use trade Sarepta and the upcoming eteplirsen data announcement with options.
Try this Sarepta options trade if you want to speculate on the long side:
Sell (10) OCT 7.50 strike Puts at 0.90 = $(900)
Buy 20 OCT 15.0 strike Calls at 2.95 = $5,900
Sell (40) OCT 20.0 strike Calls at 1.75 = $(7,000)
Buy 20 OCT 25.0 strike Calls at 1.05 = $2,100
Initial Trade P&L = $100 Debit
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