Stock option volumes soar for biotechs with Ebola drugs

Thu Oct 9, 2014 6:30pm EDT
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By Saqib Iqbal Ahmed

NEW YORK Oct 9 (Reuters) - The newest twist in the business of trying to capitalize on the outbreak of the Ebola virus is playing out in the U.S. equity options market.

Trading volumes have soared in the stock options of a pair of biotechnology companies thought to have promising treatments for the deadly disease which has claimed the lives of 3,865 people worldwide, according to the World Health Organization.

Canada-based Tekmira Pharmaceuticals, which is said to be furthest along among the companies working on a treatment, and Chimerix Inc, whose experimental oral antiviral drug was used on the first U.S. victim of the disease, have seen a huge increase in trading activity in their stock options.

Investors have been using the options market as a cheap way to bet on further gains in those two stocks, as well as other biotech stocks, with global health authorities battling to stem the spread of the disease.

"It's just pure call speculators that hope that they (the companies) are going to find the cure and announce it tomorrow," said J.J. Kinahan, chief market strategist at retail brokerage TD Ameritrade Holding Corp.

The flow of news about the spread of the Ebola globally has resulted in sudden and large moves in the share prices of biotech stocks.

On Wednesday, shares of Chimerix fell more than 18 percent in 40 minutes after news of the death of Thomas Eric Duncan, the first person diagnosed with Ebola in the United States.

Chimerix's drug, called brincidofovir, which is in late-stage testing, had been used in the treatment of Duncan according to the Texas Presbyterian Hospital in Dallas.   Continued...