inflation101

Last week Endocyte was discounted 70% and is now trading in uncharted territory. It sold down to this level due to bad results in the Phase II study for the EC145 treatment. The study showed that patients with platinum-resistant ovarian cancer who took ECYT treatment did not live longer than other patients. However, as their CEO explained, this Phase II trial was not designed to test survival. The company plans to continue with Phase III and aims for FDA approval. More comforting is the fact that during the week that followed, several directors of the company purchased stock in the open market. The value of stock purchased was significant, in fact north of $750,000. The stock price has stablized in a (surprisingly) narrow range of 3.10 and 3.20.

Friday we witnessed one of those obvious share price manipulations on Groupon's stock (GRPN). This is not a rogue trader gone wild. Nor is this a fat finger incident of entering the wrong lot size. Nor a glitch or news driven spike. No, friday was option expiration day. Right before expiration time, the value of options can be quite sensitive to last-minute extreme price changes in the underlying. In this case, literally 2 minutes before expiration, someone purchased 770k of GRPN stock and the price spiked from $22.50 to $25.15. An increase of 11% that required some serious fire power of approximately $18 million.