Karyopharm Therapeutics Inc. KPTI stock has skyrocketed more than 50% in the past week after the FDA approved the company’s Xpovio treatment for patients with multiple myeloma.
The big move in share price seems to have spooked at least one large bear Friday.
The Trades
On Friday, Benzinga Pro subscribers received two options alerts related to Karyopharm.
At 9:46 a.m., a trader sold 2,500 Karyopharm put options at a $10 strike price that expire on Aug. 16. The puts were sold at the bid price of $1.051 and represent a $262,560 bullish bet on Karyopharm shares.
The next large trade came about 3 minutes later. Likely the same trader sold 550 July 19 $10 put options at the bid price of 60 cents. This sale represented a $33,000 bullish bet on Karyopharm.
Together, the two trades represented a nearly $300,000 bullish bet on Karyopharm.
Why It’s Important
Due to the relatively complex nature of the options market, options traders are generally considered to be more sophisticated than the average stock trader. In addition, large options traders are often professional, wealthy individuals or institutions, either of which could have unique insight or information about a company.
Even traders who stick exclusively to stocks watch the option market closely for unusual trading activity as an indicator of where the “smart money” is focusing.
Unfortunately, because stock investors often use put options to hedge larger bullish stock positions, there’s no way to be 100% certain whether an option trade is a standalone purchase or a hedge against a stock position.
Given the relatively modest size of the two Karyopharm trades on Friday, it’s unlikely they were hedges in this instance.
FDA Approval
The trader dumping Karyopharm puts Friday is likely throwing in the towel on a bearish bet on Karyopharm that was placed prior to the FDA approval of Xpovio.
The approval seems to have surprised the market, even after the FDA granted an extension for the approval process back in March. At the time, the extension was seen as a positive sign that Xpovio would ultimately get approved.
Perhaps the put seller initially thought Karyopharm’s 43% rally from March 1 to the end of last week was already fully pricing in the Xpovio upside.
Exiting the position at this point after the huge rally is a sign the trader may believe the Xpovio approval rally will have legs over the next couple of months.
Karyopharm shares were down 1.53% at $8.76 at the time of publication Friday.
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