When TradeSmith CEO Keith Kaplan first held up this tiny device on stage, I thought, "Really? This little thing?"
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Today's editorial pick for you
Novo Nordisk Stock is Down Nearly 50% —Risk Geometry Points to a Comeback
Posted On Dec 09, 2025 by Joshua Enomoto
From a narrative perspective, pharmaceutical giant Novo Nordisk(NYSE:NVO) should rank among the most relevant enterprises. As a leader in weight-loss drugs and obesity/diabetes care, the company's core U.S. market represents a target-rich environment. Still, NVO stock is actually one of the worst performers among major publicly traded enterprises — and that's despite America's expanding waistline.
Table of Contents
Study after study reveals that obesity rates in the U.S. have risen for decades. According to data from the Centers for Disease Control and Prevention, many states now have obesity rates exceeding 35%, which is a threshold that was barely seen anywhere in the nation some 20 years ago. Subsequently, Novo Nordisk offers viable solutions with its flagship GLP-1 drugs, such as Ozempic and Wegovy.
Unfortunately for Novo Nordisk stakeholders, demand for the underlying company's drugs has slowed this year, forcing management to revise its 2025 outlook multiple times. Further, the competitive environment is intensifying, particularly from sector rivals like Eli Lilly(NYSE:LLY). In addition, generics, combined with newer obesity-related therapies threaten Novo Nordisk's pricing power and market share.
Still, the basic premise behind the bullish case for NVO stock is that the sell-off has been too severe. Since the start of this year, the security has dropped about 46%. Based on the principle of the reversion to the mean, NVO potentially has the makings of a comeback entity.
The problem, of course, is that this narrative is a well-worn one. But by digging into the quantitative data, we can look for empirical guideposts to help illuminate our speculative trading endeavors.
Objectifying the Price Discovery Process of NVO Stock
In most social contexts, objectification is a controversial term because it involves taking the richness of a person's being and compressing their value down to their physical attributes. In the financial market, objectifying price action — such as treating all technical candlesticks as either up weeks or down weeks — also causes a loss of information and data fidelity.
Interestingly, though, if you wanted to conduct a sociological study — let's say the influence of height as it relates to job applications — then objectification is a necessity. That's because you would need some way to neatly classify otherwise unique individuals into discrete buckets of "tall" and "not tall." It's perhaps the ultimate irony that, in order to extract a greater truth, you must compress information to reveal a deeper structure.
As it turns out, multiple socioeconomic studies have found a positive correlation between height and labor market success in developed countries. For lack of a better phrase, the data points to tall privilege in society.
By the same logic, I hypothesize that there is a positive correlation between past price behaviors (or market stimuli) and specific future outcomes. If we're being a bit cheeky, we might call this phenomenon heteroskedastic privilege — the idea that bullish or bearish structures will have a measurable influence on how future events will pan out.
Of course, if you look at any technical chart for NVO stock, you'll notice that the security is represented as a singular journey across time. Obviously, it's impossible to conduct probabilistic analysis on a sample size of one. But by segmenting price action into multiple rolling trials — a process known as sliding-window empirical distribution — we can convert a single technical chart into hundreds, if not thousands, of data points.
Primarily, the purpose of the sliding window process is to convert time-wise, continuous data (i.e. technical analysis) into time-and-state-anchored data, which is the heart of quantitative analysis. Thanks to this conversion, we can more easily calculate probability density — the price where the target security is most likely to land.
Leveraging the Geometry of Risk to Trade Novo Nordisk
Running the sliding-window process in a bespoke probabilistic algorithm, the forward 10-week median returns of NVO stock can be arranged as a distributional curve, with outcomes ranging between $46.60 and $48.12 (assuming an anchor price of $46.77, the most recent closing price). Further, price clustering would likely occur around $47.45.
The above assessment aggregates all windows or trials since January 2019. However, we're interested in the current quantitative signal, which is the 3-7-D formation; that is, in the past 10 weeks ending Dec. 5, NVO stock printed three up weeks and seven down weeks, with an overall downward slope.
The sequence itself isn't necessarily the important factor. Rather, based on prior observations, whenever NVO stock has printed the 3-7-D sequence, traders may expect the security to mostly range between $45.80 and $52.70 over the next 10 weeks, with price clustering likely to be predominant at around $49.80.
What's just as fascinating about deciphering probability density is identifying the rate of probability decay. For example, between $50 and $51, NVO's probability density declines by about 53.75%. From $51 to $52, however, density drops by 86.49%.
In other words, empirically minded traders are better off buying option premiums associated with the realistic side of the distributional curve — and selling the rest that is more fantastical and unlikely to materialize. In this manner, you would end up capitalizing the probabilistic meat of the trade while selling the sucker's bet to someone else, thus discounting your net long position.
That's essentially what's going on with the 45/50 bull call spread expiring Feb. 20, 2026. This trade requires two simultaneous transactions: buy the $45 call and sell the $50 call, for a net debit paid of $234 (the most that can be lost).
Should NVO stock rise through the second-leg strike ($50) at expiration, the maximum profit is $266, a payout of almost 114%. While this is a capped-risk, capped-reward trade, since probability decay starts to rise exponentially after $50, we actually don't want to pay for this premium.
Instead, we can sell it and discount the bullish position that is likely to emerge.
Playing the Numbers Game
While Novo Nordisk carries a compelling narrative, storylines alone usually aren't great platforms for trading, particularly because of the obvious adage: if you're reading about it in the news, the catalyst is probably already baked into the stock. Instead, my proposal is to run data analytics on NVO's iterated price action to reveal patterns and structures. Through these observations, we may calculate the security's next moves, thus giving us a huge advantage over other retail traders.
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