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Call players honed in on Sequenom, Inc. (SQNM - 5.13) yesterday, after the company received an upgrade and a price-target hike at Wedbush. Roughly 12,000 of these options crossed the tape, more than quadrupling the equity's average daily volume. Most popular was the out-of-the-money June 6 strike, where close to 7,800 calls were exchanged -- which were pretty evenly split between the ask and bid prices, pointing to a mix of buyer- and seller-driven activity. Open interest at this strike jumped by 7,061 contracts overnight, indicating that most of the volume consisted of new positions. This option is now home to peak call open interest of 15,575 contracts.
This preference for calls over puts is nothing new for SQNM. The 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio stands at whopping 54.32, confirming that calls bought to open have outnumbered puts by more than 54 to one during the past two weeks. This ratio arrives in the 89th annual percentile, meaning that traders have been picking up calls over puts at a faster-than-usual pace.
However, it should be noted that short interest on the biotech issue rose by 8.5% during the past two reporting periods, and now accounts for a hefty 22% of SQNM's float. This raises the possibility that some of the recent buy-to-open call volume is the result of hedging activity by short sellers. Either way, it would take almost 14 days to buy back these shorted shares, at the stock's average daily trading volume.
Technically, SQNM has added more than 15% year-to-date, and has bested the broader S&P 500 Index (SPX) by over 29% during the past 20 sessions. On the charts, the stock is on pace to close a second straight week above its 40-week moving average, which had previously served as a ceiling since late July.
In the first hour of the session, SQNM is up about 0.6% to trade at $5.13.