News out of Dublin, Ireland-based drug company Elan early Tuesday (June 17) reminded options traders with a flourish of the opportunities afforded by a drug breakthrough in the Alzheimer's space. Elan's experimental Alzheimer's treatment, jointly developed with Wyeth, showed promise in clinical trials.  Analyst estimates have put potential sales for proven Alzheimer's drugs at more than $20 billion, with the number of U.S. sufferers expected to approach 8 million over the next two decades.  News of the trial results had a diminishing effect on the implied volatility of Elan (nyse: ELN - news - people ) and Wyeth (nyse: WYE - news - people ) options, with a near-50% comedown in the risk premium for Elan and a 35% comedown for Wyeth. It is worth noting that even with this drop in the perceived risk to owning its shares, implied volatility on all Elan options still comes in at a one-third elevation above the historic reading. Elan options traded on a volume of more than 200,000 lots today, with most of the heavy volume favoring calls at the $30 strike in June and July.  For options traders, there are alternate plays in the Alzheimer's space, with several contenders in the race to break down beta-amyloid, the substance forming the neuron-eroding plaques in the brains of Alzheimer's patients.  Options in Myriad Genetics (nasdaq: MYGN - news - people ) have been a boon for volatility traders in recent months. With the company due to release the results of its own large-scale clinical trial of its Alzheimer's drug, Flurizan, analysts believe upside could be stupendous. Since mid-April, when the full scope of the Alzheimer's drug race became fully appreciated, option implied volatility has tripled, with the options market now pricing in three times as much price risk to Myriad shares than is already apparent from its chart.  Shares in Myriad Genetics--which currently appears in our market scan of options with high implied relative to historic volatility--climbed 2% on Tuesday to $46.46 following news of the Wyeth-Elan trial. Besides observing continued keen activity in the 30% upside calls at the July 60 strike (open interest in this position has nearly doubled over the past week), we also observed a 5,000-lot call spread go through in the August contract, with a trader buying 50-strike calls for $5.20 against the sale of the 65 calls for $2.90. This trade was entered at an initial debit of $2.30, supposing another 12% upside from current price levels just to break even.  Option implied volatility in the fourth wheel of the Alzheimer's drug drama, Eli Lilly (nyse: LLY - news - people ) has also increased substantially over the past month, up 63% since May 21, and now at 31.5%, towering over the 19% implied volatility reading. While shares closed flat on Tuesday at $47.87, we saw puts out-trade calls by more than 5-to-1 due to active buying in July at-the-money puts at the 45 strike.  Rebecca Engmann Darst is an equity options analyst with Greenwich, Conn, based Interactive Brokers, an electronic market-maker and broker of securities, options, futures, foreign exchange, bonds and funds.
After big news from Elan and Wyeth on a developmental drug, hopeful eyes turn to Myriad for more upside.