Schaeffer's Options Center
Sponsored by:
Schaeffer's Daily Option Blog

Premium Sellers Swarm Celgene

CELG investors are writing short-term puts on the stock

by 11/12/2012 11:39 AM
Stocks quoted in this article:

Last week, the shares of Celgene Corporation (NASDAQ:CELG - 75.12) finished beneath their 10-week and 20-week moving averages for the first time in nearly four months. However, thanks to some encouraging fundamental news, the stock is on the mend in early trading -- and it looks like options traders are placing neutral-to-bullish bets on the drug maker.

At last check, CELG has seen nearly 5,700 puts change hands -- about eight times its average intraday put volume. Most active has been the out-of-the-money December 72.50 put, which has seen more than 2,200 contracts traded on open interest of fewer than 900 contracts, pointing to newly opened positions. Plus, 76% of the puts crossed the tape at the bid price, suggesting they were sold.

By writing the puts to open, the sellers are expecting CELG to remain north of $72.50 -- home to its aforementioned 20-week trendline -- through the next few weeks. In this best-case scenario, the puts will expire worthless, allowing the sellers to pocket the entire credit received at initiation.

Broadening our sentiment scope, we find that CELG is no stranger to bullish betting. Even before today's rally, option buyers were scooping up calls over puts at a faster-than-usual clip, as evidenced by data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Specifically, the equity's 10-day call/put volume ratio of 4.26 stands in the 68th percentile of its annual range, pointing to a healthier-than-usual appetite for long calls of late.

Echoing that trend, the security's Schaeffer's put/call open interest ratio (SOIR) of 0.50 indicates that calls double puts among options with a shelf-life of three months or less. What's more, this ratio sits just one percentage point shy of a 52-week low, implying that near-term options players have rarely been more call-heavy during the past year.

In addition, the brokerage bunch was also bullishly biased heading into today's pop. The stock harbors 20 "strong buys" and one "buy" rating, compared to six "holds" and not one "sell" or worse suggestion. Plus, the average 12-month price target stands at $84 -- implying expected upside of 17.5% to CELG's closing price of $71.50 on Friday, and in territory not yet charted by the stock. Furthermore, analysts are growing even more bold today, with Cantor Fitzgerald upping its price target to $96 from $82 ahead of the bell.

At last look, the shares of CELG are up 5.1% to wink at the $75.12 level. The stock topped out at $78.46 earlier in the session, gaining ground after a late-stage trial of Abraxane showed improved survival in pancreatic cancer patients. The timing of the data came as a surprise, with most CELG watchers expecting the company to report the results in January. Assuming things keep going well for Abraxane, Celgene expects sales of the drug to come in around $1 billion to $1.25 billion by 2015.


permalink

Featured Brokers
ADVERTISEMENT
Unusual Option Volume
Option Flow
ADVERTISEMENT
Most Active Stocks
Most Active Option Strikes
Largest Open Interest

Partner Center

© 2014 Schaeffer's Investment Research, Inc. 5151 Pfeiffer Road, Suite 250, Cincinnati, Ohio 45242 Phone: (800) 448-2080 FAX: (513) 589-3810 Int'l Callers: (513) 589-3800 Email: service@sir-inc.com

All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.

Market Data provided by QuoteMedia.com | Data delayed 15-20 minutes unless otherwise indicated.