BEDMINSTER, NJ ( TheStreet) -- NPS Pharmaceuticals ( NPSP) is slated to face an FDA advisory panel committee for Gattex for the treatment of adults with short bowl syndrome on Oct. 16. The company's FDA drug approval decision date is Dec. 30. I've structured an options trade to play the NPS Pharma Gattex panel below, but first, a brief explanation of the FDA advisory panel process. The FDA often convenes advisory panels as part of the drug review process. These panels, comprised of outside experts, provide advice to the FDA on whether or not to approve a drug. Over the course of a day (or half day in some cases), the FDA and the drug sponsor present efficacy and safety data to the panel's experts, who ask questions and deliberate before voting on whether or not to recommend a drug's approval. It should be noted that advisory panels are just that -- advisory -- and that FDA makes the final decision on drug approvals. Still, these panels are among the most exciting biotech catalysts for traders. Trading FDA drug advisory panels can be tricky because there are several, potentially major, interim catalysts leading up to the day of the meeting. Stocks are almost always halted on the day of advisory panels. The first catalyst is the release of FDA's briefing documents that typically occurs two days prior to the meeting. The briefing documents usually include the FDA's clinical review of the drug. An FDA review that is surprisingly negative or positive often causes a lot of stock volatility. If you want to trade around these FDA panels, you'll first want to decide whether to place a trade before the release of the FDA briefing documents or post release (but before the actual meeting takes place.) An alternative trading strategy is to simply wait until the meeting is over and fade the move once the stock is unhalted. Let's talk about the NPS Pharma trade into its Oct. 16 Gattex advisory panel. In this trade I will be using a no-cost bullish strategy and I will execute the trade prior to the release of the briefing documents. NPS Pharma has run up strongly into the panel already, with the stock moving from around $7 to $10 per share. Options currently imply an up or down move in the stock of $2.50 per share from current levels and analysts currently favors a positive outcome and a share pop to the $12-to-$13 per share range. Here is the trade: Buy 10 OCT 9.0 strike Calls at 1.80 = $1,800 Sell (10) OCT 10.0 strike Calls at 1.15 = $(1,150) Sell (10) OCT 11.0 strike Calls at 0.70 = $(700) Buy 10 OCT 12.0 strike Calls at 0.35 = $350 Sell (10) OCT 7.0 strike Puts at 0.30 = $(300) Initial P&L = $0P&L Diagram: This is a long Call Condor fully financed by a sold Put. The trade costs nothing, excluding commissions. The trade profits as long as the stock settles between $9 and $12 by expiration --note this is below current analysts estimates that tend to be overly aggressive. Maximum profit is achieved between $10 and $11 a share and results in a $1,000 gain for this position size. Losses start at $7 and accelerate below this level given the trade structure uses a short Put (where one is basically short 1,000 shares for this size.) The Call Condor should be executed as one order with a broker. There is some optionality with the sold Put portion of the trade: It can be sold pre-briefing documents or after release but (obviously) before the stock gets halted. If you are able to catch a sell-off or a ramp up of implied volatility it may be possible to get a higher sale value and actually trade into the strategy at a credit. (Of course, if the stock moves higher, selling the Puts may no longer make sense). Pelz has no position in NPS Pharma. To learn more about using options to trade biotech stocks, check out Tony Pelz's book, The Biotech Trader Handbook or subscribe to Chimera Research Group.