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Questcor Pharmaceuticals (QCOR) Option Traders Spring Into Action

Call volume spikes in QCOR as stock rallies on Synacthen news

by 6/11/2013 2:20 PM
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Questcor Pharmaceuticals Inc (NASDAQ:QCOR) has pounced onto today's unusual option volume charts, as both call and put players have descended in the wake of the stock's news-driven spike higher. In fact, roughly 24,000 calls have changed hands (nearly eight times the typical intraday volume) versus 11,000 puts (quadruple the norm).

Five of the six most active strikes are on the call side of the fence, led by the June and July 50-strike calls. While volume exceeds open interest at both of these out-of-the-money strikes -- pointing to new positions -- there appears to be a mixture of buying and selling. Some speculators are likely anticipating the $50 level will act as short-term resistance, therefore, while others are making aggressive bets on continued upside through the next few weeks.

Also notable is the October 34 call, where close to two-thirds of the 1,700-plus calls traded have gone off at the ask price. Given the transaction's volume-weighted average price (VWAP) of $13.23, those traders who might be purchasing these long-dated calls to open have a breakeven price (at expiration) of $47.23 (strike price plus VWAP). Delta on these calls has risen to 0.86 today from 0.65 at Monday's close, meaning the calls will appreciate by $0.86 for every $1 move higher in QCOR, and will drop by $0.86 for every $1 the underlying stock declines.

QCOR shares are currently up 19.8% at $43.98 after the company offered Novartis AG a total of $135 million for the rights to immune drug Synacthen. The drug -- used to treat autoimmune disorders and inflammatory conditions -- isn't yet approved in the U.S., and Questcor will work on launching it here as well as distributing it in more than 35 other countries.

Heading into today's news, the speculative crowd was fairly committed to the bearish camp. The stock's 50-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands at 1.16, meaning puts have been purchased to open at a faster clip than calls over the last 10 weeks. What's more, this ratio is higher than 73% of the past year's readings. In similar fashion, the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.71 is just 7 percentage points shy of an annual peak, suggesting short-term options players have rarely been more put-focused.

Today's move has lifted Questcor Pharmaceuticals Inc (NASDAQ:QCOR) to its highest point since last September.


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