Amicus: Bullish Options Trade Into Clinical Trial Catalysts

NEW YORK ( TheStreet) -- Amicus Therapeutics ( FOLD) has several phase II and phase III clinical trial catalysts over the next months that, if positive, could provide fuel for fairly large share-price appreciation on top of the 70% gains already seen in the stock year-to-date. Adam Feuerstein wrote a preview of the Amigal phase III monotherapy trial in Fabry disease last Friday.

Options currently imply a $2.50 move in the shares -- $8.30 on the upside, $3.30 on the downside. An interesting, near-term, bullish trade with good risk reward is the following:

Buy 100 JAN 5.0 strike Calls at 1.95 = $19,500
Sell 200 JAN 7.5 strike Calls at 1.10 = $(22,000)
Buy 100 JAN 10.0 strike Calls at 0.50 = $5,000

Initial Trade P&L = $2,500 Debit

This is a JAN expiration Call Butterfly (long.) Total risk is defined and equal to $2,500 and occurs if Amicus shares trades below $5 and above $10 by Jan. 19 expiration. The trade breaks even at $5.25 per share and $9.75 per share. Maximum return is $22,500 if Amicus shares hit $7.50 by expiration, which represents a risk/reward of 9 times.

Pelz has no position in Amicus.

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.
Tony Pelz was a trader on a major European bank's proprietary trading desk, responsible for a portfolio with limits of more than $200 million. Prior to proprietary trading, Pelz worked with several global investment banks in roles ranging from corporate finance, M&A to credit and business development. He is author of The Biotech Trader Handbook, 2nd Edition, co-founder of the small-cap biotech research and trading site Chimera Research Group and operator of Pelz currently resides in Denver, Colorado where he trades for his own account.