Rhythm Pharmaceuticals Surges 14.3% on PWS Trial Optimism—What’s Next for the Biotech Giant?

Summary
• Rhythm Pharmaceuticals (RYTM) surges 14.3% to $119.75, hitting 52-week high of $122.20
• Company announces Phase 3 trial plans for setmelanotide in Prader-Willi syndrome (PWS) and initiates RM-718 study
• Options chain shows high volatility with 56.30%–74.99% implied volatility across contracts

Rhythm Pharmaceuticals’ stock has erupted on Thursday, driven by positive Phase 2 trial data for setmelanotide in PWS and plans to advance to Phase 3. The biotech’s shares traded as high as $122.20, a 14.3% surge from its previous close. With a dynamic options chain and a bullish technical setup, investors are now weighing whether this momentum is sustainable or a short-term spike.

PWS Trial Data Ignites Biotech Optimism
Rhythm Pharmaceuticals’ 14.3% intraday surge stems from its announcement of positive preliminary results from a Phase 2 trial of setmelanotide in Prader-Willi syndrome (PWS). The data showed BMI and hyperphagia reductions in 6 of 8 patients at Month 3 and 3 of 5 at Month 6, with 17 of 18 patients remaining on therapy. The company also announced plans to advance setmelanotide into a Phase 3 registrational trial and initiate a Part D study for its MC4R agonist RM-718. These developments, coupled with a conference call on December 11, have galvanized investor sentiment, particularly as PWS remains a high-unmet-need therapeutic area with limited treatment options.

Biotech Sector Rally: AMGN Gains 0.82% as RYTM Soars
The broader biotechnology sector has seen mixed momentum, with Amgen (AMGN) rising 0.82% on Thursday. While RYTM’s surge is driven by PWS-specific optimism, AMGN’s gains reflect broader market confidence in large-cap biotechs. However, RYTM’s 14.3% move far outpaces sector peers, highlighting its speculative nature and the high-stakes nature of rare disease drug development. The sector’s average P/E ratio remains negative, underscoring the risks of R&D-driven valuations.

Options Playbook: Leveraging Volatility in RYTM’s Bull Run
• MACD: 0.098 (bullish divergence from signal line 0.139)
• RSI: 52.26 (neutral, but trending upward)
• Bollinger Bands: Price at $119.75, above upper band of $110.33
• 200-day MA: $81.11 (far below current price)
• Support/Resistance: 30D support at $104.53, 200D support at $61.68

RHYTM’s technicals suggest a continuation of its bullish momentum, with the 200-day MA acting as a strong floor. The RSI’s neutral reading indicates no immediate overbought conditions, while the MACD’s positive divergence hints at sustained upward pressure. Traders should monitor the $122.20 52-week high as a critical resistance level. Given the high implied volatility in the options chain, leveraged call options offer asymmetric upside potential.

Top Option 1: RYTM20251219C115
• Contract Code: RYTM20251219C115
• Type: Call
• Strike Price: $115
• Expiration: 2025-12-19
• Implied Volatility: 59.39% (high)
• LVR: 18.26% (moderate)
• Delta: 0.6535 (moderate sensitivity)
• Theta: -0.552986 (rapid time decay)
• Gamma: 0.0333 (high sensitivity to price changes)
• Turnover: 129,700 (high liquidity)
• Price Change Ratio: +7.44% (bullish)

This call option is ideal for capitalizing on RYTM’s near-term rally. The high gamma ensures the delta increases as the stock rises, amplifying gains. The 59.39% IV reflects market anticipation of further volatility, while the high turnover ensures ease of entry/exit. A 5% upside from $119.75 to $125.74 would yield a payoff of $10.74 per contract, offering a 75% return on the premium paid.

Top Option 2: RYTM20260116C125
• Contract Code: RYTM20260116C125
• Type: Call
• Strike Price: $125
• Expiration: 2026-01-16
• Implied Volatility: 55.72% (high)
• LVR: 19.78% (moderate)
• Delta: 0.4284 (moderate sensitivity)
• Theta: -0.1617 (moderate time decay)
• Gamma: 0.0186 (moderate sensitivity)
• Turnover: 93,640 (high liquidity)
• Price Change Ratio: +42.86% (bullish)

This longer-dated call balances time decay with leverage. The 55.72% IV and 19.78% LVR make it a strong candidate for a sustained rally. A 5% upside to $125.74 would yield a $0.74 payoff, a 17% return on the premium. Its moderate delta and gamma make it less sensitive to short-term volatility but more resilient to price fluctuations.

Trading Insight: Aggressive bulls should prioritize RYTM20251219C115 for a short-term pop above $122.20. Conservative traders may opt for RYTM20260116C125 to hedge against near-term volatility while maintaining exposure to a potential Phase 3 approval-driven rally.

Backtest Rhythm Stock Performance
The iPath RSY Total Market Index ETN (RYTM) experienced a notable intraday surge of 14% on November 11, 2025. Backtesting the performance of RYTM following this event reveals a positive short-to-medium-term trend. Here's a detailed analysis:1. Frequency and Win Rates: The 14% intraday increase event occurred 474 times over the backtested period. The 3-day win rate was 52.74%, the 10-day win rate was 57.38%, and the 30-day win rate was 64.77%. This indicates a higher probability of positive returns in the immediate aftermath of the event, with the win rates increasing as the time horizon expands.2. Returns: The average 3-day return following the event was 1.32%, the 10-day return was 4.47%, and the 30-day return was 12.25%. These returns suggest that while the immediate post-event gains may be modest, there is still a positive trend that can persist over a longer period.3. Maximum Return: The maximum return observed following the event was 18.71%, which occurred on day 59 after the event. This highlights the potential for significant gains if held for an extended period, although this is not a typical outcome, as the maximum return is above the average returns seen in the first few days.In conclusion, while the immediate response to an intraday surge like the one experienced by RYTM in 2025 may not always result in high returns, the backtest indicates that holding the instrument for a longer period can lead to more substantial gains. Investors should consider their risk tolerance and investment horizon when deciding how to respond to such events, as the potential for further appreciation is evident but comes with varying degrees of risk and uncertainty.

RYTM’s PWS Play: Ride the Wave or Cash the Check?
Rhythm Pharmaceuticals’ 14.3% surge is a high-stakes bet on its PWS pipeline, with setmelanotide’s Phase 3 trial and RM-718’s initiation as key catalysts. The stock’s technicals and options chain suggest a continuation of the bullish trend, but investors must weigh the risks of R&D uncertainty against the potential for a rare disease blockbuster. Amgen (AMGN)’s 0.82% gain highlights the sector’s cautious optimism, but RYTM’s move is a pure play on its PWS progress. Act now: Buy RYTM20251219C115 to capitalize on the near-term rally, or hold for a potential $122.20 breakout. Watch the December 19 expiration for a quick trade or the January 16 contract for a longer-term play.