Large Option Trader Sells TG Therapeutics Calls After Big Run

TG Therapeutics Inc TGTX shares were trading higher for much of Monday's session before closing down 0.83%, and one large options trader was taking profits.  

The Trade

On Monday morning, Benzinga Pro subscribers received an option alert due to an unusually large TG Therapeutics trade.

At 11:05 a.m., a trader sold 2,000 TG Therapeutics call options at a $9 strike price that expire on Nov. 15.

The calls were sold at the bid price of 45.1 cents and represent a $90,200 bearish bet that TG shares will still trade at or below $9.45 within the next three months.

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.

In this instance, the trade was unlikely an institutional hedge due to its relatively small size. 

What's Next

The big TG Therapeutics trade comes less than a week after the company reported a “well-defined path to a regulatory submission for umbralisib in marginal zone lymphoma.”

The company also said investors can expect TG to begin a rolling New Drug Application submission for patients with previously treated MZL, reveal final data from the MZL cohort of the UNITY-NHL registration directed trial evaluating umbralisib in MZL and potentially present top-line progression free survival results from its Phase 3 UNITY-CLL trial evaluating the ublituximab and umbralisib combination treatment in patients with chronic lymphocytic leukemia.

All of these potential catalysts are expected to occur in either late 2019 or early 2020.

Monday’s call seller may anticipate that one or more of the company’s anticipated near-term updates will disappoint the market. Given the market pressures in the biotech space due to uncertainty related to drug prices and health care — as well as TG Therapeutics' 81.7% year-to-date run — the trader may simply be taking the opportunity to lock in some gains on TG’s run and generate some income by selling deeply out-of-the-money covered calls.

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