By Karee Venema / October 24, 2017 / www.schaeffersresearch.com /
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It's been a strong year for the biotech sector, with the SPDR S&P Biotech ETF (XBI) and Health Care Select Sector SPDR Fund (XLV) boasting year-to-date gains of 42% and 20%, respectively. Against this backdrop, Guggenheim initiated coverage on a number of biotech stocks with an upbeat "buy" rating, including Celgene Corporation (NASDAQ:CELG), Biogen Inc (NASDAQ:BIIB), and Ocular Therapeutix Inc (NASDAQ:OCUL). Here's a closer look at how shares of CELG, BIIB, and OCUL are performing today, and how options traders are reacting.
Celgene Options Traders Active Ahead of Earnings
Celgene stock jumped into positive territory out of the gate -- hitting its intraday high of $123.25 within the first five minutes of trading. The shares quickly erased these modest gains, though, and were last seen down 1.6% at $120.37.
It's been a tough month for CELG stock, which topped out at a record high of $147.17 on Oct. 2, only to gap to four-month lows last Friday in the wake of the company's discontinued
Crohn's disease treatment trial. The shares are now up 4% ahead of Celgene's Thursday morning earnings report, but in the past three quarters, the stock has averaged a single-session post-earnings loss of 1.9%.
Regardless, calls are outpacing puts by a nearly 2:1 ratio this afternoon, with roughly 35,000 total contracts traded -- 1.6 times what's typically seen at this point in the day. Most active is the December 125 call, where it looks like new positions are being purchased. Pre-earnings traders appear to be selling to open the weekly 10/27 120-strike puts, betting on a short-term floor or a post-earnings
volatility crush.
Biogen Stock Earnings Reaction Draws Fresh Batch of Call Traders
Biogen stock has plunged 4.5% today to trade at $313.56, after concerns over domestic
Spinraza sales surfaced in the company's third-quarter earnings report. The shares have been sliding since topping out at a two-year high of $348.84 last Wednesday, but appear to have found a foothold atop their 80-day moving average -- and remain nearly 20% higher year-to-date.
Options traders have been quick to respond to BIIB stock, with 37,213 contracts exchanged -- almost seven times the average intraday rate, and a new 12-month high. The weekly 10/27 320-strike call is most active, and it looks like there could be a mix of buy- and sell-to-open activity here. Those buying the calls expect Biogen shares to move back above $320 by expiration at this Friday's close, while those writing the calls expect the strike to hold as a near-term ceiling.
Ocular Stock Surge Runs Headlong Into Familiar Resistance
Ocular shares, on the other hand, are surging -- up 5.9% at $5.91. Nevertheless, today's rally was quickly contained near $6.40 -- a level that served as a ceiling in the latter half of September, and is home to the stock's 80-day moving average. Plus, the security remains down 29% year-to-date.
In the options pits, total intraday volume has swelled to four times what's typically seen. On an absolute level, though, the numbers are pretty lackluster, with just 201 calls and 211 puts on the tape. More broadly, peak open interest of 1,384 contracts is found at OCUL's December 10 call, though it's not clear whether these positions were bought or sold at initiation.