ALTH: Selling Volatility Ahead of FDA Review

Allos Therapeutics (ALTH) is halted today as the company is presenting its lymphoma drug pralatrexate in front of the FDA's cancer drug advisory panel this afternoon. A panel vote is expected late this afternoon, with a conference call by Allos afterwards. A final decision on the drug is expected from the FDA on or by September 24th.

I was a little late to this one, and options activity has shown no clear bias (both calls and puts have been very active since July, with rising IV, chart below).

Given the uncertain direction and elevated volatility, I wrote $2.50 September Puts (credit of $0.15) for a fairly low risk trade. Shares closed at $7.86 on Tuesday.

Update (9/3/2009): ALTH's drug was recommended for approval by the FDA panel yesterday by a 10-4 vote. Shares are only up around 3.5% now in premarket trading. This is quite a lukewarm reaction from traders. Nevertheless, my put position should be safe and I expect them to expire worthless next next week.

ALTH Trading History:
09.01.2009 Wrote $2.40Sept puts (.QATUZ) for a credit of $0.15.
09.20.2009 .QATUZ expiration at $0.00 (+100%).
Current Position: None