I’ve Got Some Biotech ‘IRON’s in the Fire
Here are two cover-call trades I’m working on and why they look promising.
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The biotech sector continues to enjoy somewhat of renaissance here in 2026 after years of being a market laggard. The renewed interest in this beaten down sector has coincided with a notable uptick in M&A activity this year. Deal volume in the first half of 2026 across the industry exceeded all of that of 2025.
Whether the surge in recent acquisitions continues through the dog days of summer is anybody’s guess. But I am still finding some values in the space for my covered-call trades. Given my growing caution around the overall market, I am becoming even more conservative with these trades. I am choosing to use option strike prices six to nine months out at 10% to 20% below the current trading levels of the target stocks for these targets. That curtails some potential upside but provides additional downside mitigation. A solid trade off in what I view as an overbought market. In today’s article, I highlight two recent mid-cap names that have been added to my portfolio via these means.
We start with Disc Medicine (IRON) that first entered my portfolio in late June. The company is advancing three clinical programs targeting five blood disorders. These in-licensed candidates are designed to modify two biological pathways associated with the formation of red blood cells: heme biosynthesis and iron homeostasis through hepcidin modulation.
Disc’s lead asset Bitopertin is currently undergoing evaluation in a pivotal Phase 3 trial called APOLLO and is targeting both erythropoietic protoporphyria (EPP) and X-linked protoporphyria (XLP). EPP is a rare genetic condition characterized by extreme pain and skin damage; XLP is a type of disorder that causes skin tingling, burning, itching and other sensations after sun exposure. Initial results should be out before the close of this year with a new drug application anticipated to be filed in the first half of 2027. Based on previous study data, I expect this trial to be successful. The company other two primary programs are in mid-stage development, and the company has several “shots on goal.” The company also has over $700 million of cash on its balance sheet. The stock trades for just under $80 a share and net of cash and has just over a $2.3 billion market capitalization.
CG Oncology (CGON) is a more recent addition to my portfolio via covered-call orders. The stock trades for just under $70 a share and sports a market capitalization of just north of $6 billion. This late-clinical-stage biopharmaceutical company is focused on the development of cretositimogene grenadenorepvec for the treatment of non-muscle invasive bladder cancer. The program is currently being advanced in three clinical trials, two as a monotherapy, and one as both a monotherapy and in combination with chemotherapy.
To date, trial results have been encouraging enough for the company to initiate a rolling Biologics License Application filing for HR BCG-unresponsive NMIBC in 2025 with expectations for it to be completed by year-end. The BLA would allow it to market the product in the U.S. Like Disc, the company has a cash rich balance sheet with nearly $1.1 billion of net cash and marketable securities on it. It’s enough to fund all planned activities through the end of the decade, if necessary. I expect the shares to continue to grind higher on a bevy of trial data in the second half of this year and 2027, making the name a solid covered call trade.
At the time of publication, Jensen was long CGON and DISC.
