January 2010 is going to be a highly unusual month for traders who use options to speculate around corporate earnings.

There was more than just interesting options trading on Monday in biopharmaceutical stock InterMune Inc. (ITMN). Unfortunately, though, this is one of those cases that can suck options traders in and leave them with huge losses unless everything goes without delay and ends up in a boom-or-bust news scenario. 

Sure, all options expire worthless if they are out of the money, and that in turn wipes out any remaining time value upon expiration. But what about when implied volatility gets so expensive for what options traders refer to as a binary options trade that it is too much risk for an already risky strategy?

We have seen this before and we will see it again. If you’re familiar with Dendreon (DNDN) and Human Genome Sciences Inc. (HGSI), then you have seen how options volatility and trading can become very expensive ahead of FDA events. Sometimes the price of playing poker is just too high, at least for a volatility trade.

We saw elevated options activity in ITMN go off from an alert late last week from Joe Kunkle over at OptionsHawk.com.

Then came Monday’s mid-morning announcement of an FDA review date for the company’s investigational drug candidate for the treatment of patients with idiopathic pulmonary fibrosis, which was set for March 9. This took the already pricey options up through the roof. Idiopathic pulmonary fibrosis is a uniformly fatal disease that affects 100,000 Americans, with 30,000 people diagnosed annually, and no effective treatments on the market today.

A pure volatility trade yesterday in the closest speculative contracts effectively cost about $9.50 for less than two months of option time value for a stock that closed at $16.50. Today might just be making things worse now that shares crossed another strike price of $17.50. 

The volatility trade yesterday was with the out-of-the-money ITMN March 17.50 Calls and the ITMN March 15 Puts. Today at 11 a.m. Eastern, playing volatility via a $17.50 straddle cost $10.60 with the stock at $17.70, and the last $17.50 strikes cost $5.30 each on both the put and call options for March expiration.

The big risk here is not just that this could be a make-or-break event for InterMune. How many times has the FDA just told a company that it needs more time for a review? How many times has the FDA delayed an application, a review or a panel decision with a request for more information? How many times has a company said late in a filing process that it needs more time for evaluation?

Those are just some of the risks. These options expire in 46 calendar days, and they are already incredibly expensive. For a pure volatility trade to work here, the stock has to rise above $28.10 or fall below $6.90 by March 19.

ITMN’s 52-week trading range is $10.48 to $19.12, and the market cap is roughly $827 million after the gain of the last two days. The hope here is for the next blockbuster drug. But for a pure volatility trade, the price of poker is just too high.