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Dynavax Bears Load Up on Put Options

Front-month DVAX puts are a popular choice today

by 12/31/2012 12:44 PM
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Put options are in heavy rotation today on biotech stock Dynavax Technologies Corporation (NASDAQ:DVAX - 2.75), with more than 2,200 contracts crossing the tape so far. By contrast, the equity's average single-day put volume totals only 243 contracts. Meanwhile, just 97 calls have traded on DVAX in today's session.

The most active option is the January 2013 2.50-strike put, where no fewer than 2,132 contracts have been exchanged. More than three-quarters of these puts traded at the ask price, suggesting they were purchased, and implied volatility on this front-month strike has surged an impressive 21.6 percentage points. With only 1,458 contracts in open interest on the January 2.50 put, it looks like traders are buying new bearish bets on DVAX this afternoon.

Since these options traded at a volume-weighted average price (VWAP) of $0.15, most of these put buyers need DVAX to fall below breakeven at $2.35 (strike price minus VWAP) prior to front-month expiration. So, based on the stock's current perch at $2.75, DVAX has just under three weeks to lose more than 14.5% of its value.

On the charts, DVAX has yet to recover from a drastic bearish gap in mid-November, which shaved off roughly half of the stock's value in one day. That big drop was sparked by a Food and Drug Administration (FDA) panel's safety warning on the company's Heplisav vaccine, but a full regulatory review of the drug is not expected until late February. In the meantime, DVAX CEO Dino Dina, M.D., is scheduled to present at the J.P. Morgan Healthcare Conference in San Francisco next Monday, Jan. 7.


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