Intellia Therapeutics (NTLA) stock is reeling, dropping significantly today after announcing a temporary pause in patient dosing and screening for its Phase 3 MAGNITUDE trials (nex-z for ATTR amyloidosis). The cause? A serious liver safety signal—specifically, Grade 4 liver transaminases and increased total bilirubin—in a patient.
The market has reacted with understandable fear, creating extreme volatility and, consequently, high options premiums. This brings up a classic options trading question for those bullish on the long-term story: Is this the time to sell cash-secured puts on NTLA?
🎲 Risk vs. Reward for Selling Puts on NTLA
Selling a cash-secured put is a bullish or neutral strategy where you collect premium (your maximum profit) in exchange for agreeing to buy the stock at a specific lower price (the strike price) if the option is assigned.
The Reward (Premium Income):
Extreme Volatility = High Premium: The sudden drop and uncertainty have sent the implied volatility (IV) on NTLA options skyrocketing. This means the premiums you collect for selling puts are significantly inflated right now.
Buying at a Discount: If the stock recovers or stabilizes above your chosen strike price, you keep the entire premium as pure profit.
Lowered Cost Basis: If the stock continues to fall and you are assigned shares, the premium you collected effectively lowers your net purchase price. For example, if you sell the $\$10$ put for $\$2.00$ and get assigned, your cost basis is $\$8.00$ per share.
The Risk (The Biotech Nightmare):
Binary Event Risk: This is the core danger in biotech. A safety signal in a Phase 3 trial—especially one involving the liver—is a major setback for the nex-z program. If the issue is systemic and irreparable, the drug could be scrapped, and the stock could fall far lower.
"Catching a Falling Knife": NTLA has already cratered, but there is no floor. If you sell a put at a strike you thought was "safe," you could still be forced to buy shares at a price much higher than the subsequent market price, leading to a significant unrealized loss on the stock.
Tie-up of Capital: You must set aside the cash to buy the shares at the strike price (e.g., $\$1,000$ for a $\$10$ strike put on 100 shares). This capital is tied up until the option expires or is closed.
⚖️ The Calculated Trade-off
This is a high-conviction trade for a long-term NTLA bull.
Select a Strike Price Wisely: Only sell a put at a strike price where you would be genuinely happy to own 100 shares of NTLA. This safety event has shaken the stock to a price that may be closer to its cash value and the value of its remaining pipeline (like the Hereditary Angioedema program, which is still in a Phase 3 trial). Consider strikes that price in a massive, continued hit to the valuation.
Factor in the Premium: The fat premium acts as a buffer. The stock has to drop below (Strike Price - Premium Received) for the trade to be a loss (not including transaction costs).
Short-Term vs. Long-Term: The risk is very high in the immediate short term as the market digests the news. Selling a put with a longer expiration date (e.g., 60-90 days out) can give the company time to communicate a risk-mitigation strategy to the FDA, which could stabilize the stock.
Bottom Line: Selling puts on NTLA now is a bet that the current sell-off over-discounts the company's entire CRISPR platform and remaining pipeline, and that the liver safety issue is either manageable, specific to a sub-population, or only impacts the nex-z program and not the fundamental technology. If you don't believe in the underlying science and the potential for a rebound, stay away.
What strike price are you watching, or are you sitting on the sidelines? Let us know in the comments! 👇
Disclaimer: This is for informational and educational purposes only and is not financial advice. Options trading involves high risk.
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