First Week of March 20th Options Trading For Syndax Pharmaceuticals (SNDX)

Syndax Pharmaceuticals (SNDX) is presented as an options trade idea: the $19.00 put trades with a $0.05 bid, implying a net cost basis of $18.95 if assigned versus the $20.57 stock price (≈8% OTM) and a 67% probability of expiring worthless, yielding 0.26% (1.53% annualized). On the call side, the $23.00 covered call also has a $0.05 bid (≈12% OTM) and a 52% chance to expire worthless; if the stock is called at the March 20 expiry the trade produces a 12.06% total return (0.24% boost, 1.41% annualized). Implied volatilities are elevated (puts 101%, calls 96%) versus trailing 12-month volatility of 68%; StockOptionsChannel will track odds and contract histories on its site.

Analysis

Market structure: The immediate beneficiaries are short-dated option sellers and market makers collecting volatility premium (put bid $0.05, call bid $0.05) while downside risk transfers to cash-secured put writers and covered-call sellers. Shallow option liquidity (nickel bids) and IV steepness (puts 101% / calls 96% vs realized 68%) signal dealer inventory/profit capture rather than broad institutional directional conviction; equities holders face capped upside if covered calls are widespread.

Risk assessment: Tail risk is binary and asymmetric — a negative clinical/regulatory event could easily inflict a >50% gap move, making the 0.26%/0.24% yield for March expiry poor compensation for left-tail risk. Intra-day and week horizons center on gamma and IV re-pricing; over months the company’s pipeline/funding cadence and potential dilution are dominant. Hidden dependencies include assignment liquidity (risk of forced ownership into a gap down) and margin shocks to option sellers if volatility spikes.

Trade implications: For capital-efficient exposure, prefer defined-risk option structures (e.g., sell 19/16 put spread) rather than naked short puts; if long equity, prefer selling the Mar20 $23 covered call only as a 1–3% incremental yield enhancement while accepting capped upside to $23. Shorting IV vs realized is attractive given 101% vs 68%, but scale positions to <1–2% portfolio and use wings to limit tail loss.

Contrarian angle: Consensus underprices binary downside — the low absolute premium (nickels) is misleading; premium is tiny relative to potential gap risk so naked sellers are likely under-compensated. Conversely, if near-term catalysts (30–90 days) are credible, buying deep OTM calls ahead of positive readouts could be mispriced and offer asymmetric upside; historical biotech crushes warn that option selling here has high blow-up risk.

Key Decisions for Investors

• If willing to own SNDX, sell cash‑secured Mar20 $19 puts (collect $0.05) sized to no more than 1% of portfolio notional, accepting an effective entry at $18.95; set a hard close rule to buy‑to‑close if premium >$0.25 or SNDX trades below $17.50 (limit single‑event tail exposure).
• Prefer defined‑risk short volatility: sell Mar20 19/16 put spreads instead of naked puts to cap max loss to $3.00 less credit; target position size ≤1–2% portfolio and require minimum net credit that implies >1% return to expiration annualized before taking trade.
• If already long SNDX equity, write Mar20 $23 covered calls to boost yield (0.24% / 12.06% to assignment) but limit covered‑call allocation to 25–50% of the long position to retain upside participation for potential catalysts over the next 30–90 days.
• Avoid naked short‑strangle/short‑delta trades larger than 1–2% portfolio given IV vs realized skew; instead, for directional asymmetric upside, buy OTM calls (Mar/Jun) ahead of known catalysts, sizing to 0.5–1% portfolio as high‑reward lottery tickets.
• Monitor: daily option‑implied odds on the Mar20 $19 put (currently 67%) and IV divergence (IV/realized >1.25); reduce or hedge short exposure immediately if the put 'odds of worthless' fall below 50% or IV jumps >50% intraday.