The Unusual Flow
On November 10th, Bullflow flagged an options trade in CDTX. A single trader dropped $60,000 into short-dated OTM 130 strike call options expiring on 11/21, while the stock was trading near $103.
Below is the actual flow as it appeared in Bullflow:
This wasn’t a normal trade:
- Large size for a small cap biotech stock
- OTM call with only 11 days to expiration
- Directional, aggressive, and clearly expecting a sudden move
- Volume exceeding open interest
The Acquisition News
Just days later on November 14th, the news dropped.
Merck announced it was acquiring Cidara Therapeutics for $221.50/share in cash, valuing the deal at roughly $9.2B. The announcement instantly sent CDTX soaring, more than 100% higher within hours.
Read more here:
https://www.investopedia.com/this-biotech-stock-price-more-than-doubled-here-is-why-cdtx-flu-treamtment-11849694
Here’s how the stock reacted:
The timing between the options flow and the acquisition news was highly suspicious. A giant, perfectly timed, short-dated call buy right before a massive premium buyout? That’s exactly the kind of trade the SEC should investigate. This shows how unusual options activity can precede large catalysts.
The Aftermath
Once the buyout was announced, the stock exploded past its strike price and the contract went in the money. The $60K position would have returned over 35x, resulting in about $2.2M in total by the end of the day.
Biotech has always been fertile ground for insider leaks, and this flow lined up almost too perfectly. It proves that there is always someone there who knows something, and clearly someone was ready to capitalize on this acquisition news. Insider trading at its finest.
Spot the Next Biotech Insider Trades
To catch potential catalyst trades before the crowd, here’s what to look for:
- Large Call buys with volume exceeding open interest
- Calls exceeding average unusual options flow. The $60k was very unusual because $CDTX typically doesn't receive any unusual options activity. For tickers with more regular options flow, a higher premium would be required to determine it as unusual.
- Out of the money Calls expecting large moves
- Biotech or pharma names are prone to large catalysts such as FDA decisions, trial readouts, and M&A bids.
Final Takeaway
The CDTX trade shows why options flow matters. It shows how a single, aggressive order can foreshadow huge moves in a stock. And it’s a reminder that in markets, especially biotech, someone often knows something before everyone else does.
