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Auxilium Pharmaceuticals Roars Back Into the Black for 2012

Option volume surges as AUXL shares rocket higher

by 6/4/2012 12:15 PM
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Option activity has spiked today on Auxilium Pharmaceuticals, Inc. (AUXL - 20.37), with roughly 4,000 calls and 3,500 puts changing hands by mid-session -- already surpassing the stock's average single-day volume of fewer than 2,300 total contracts. Traders are dividing their attention between a pair of front-month strikes. AUXL's June 17.50 put has seen 2,737 contracts cross the tape, while 2,364 have traded at the June 22.50 call. The majority of the volume at both strikes has traded closer to the ask price, implying that buyers are driving the day's action.

Today's big surge in option buying coincides with a substantial jump in AUXL shares, after the drug company announced positive results from a study of Xiaflex for the treatment of Peyronie's disease. The stock has vaulted to an intraday gain of 8%, placing AUXL just north of the round-number $20 level -- and squarely in between today's two most active option strikes.

The sharp rally in AUXL could be the result of a short-squeeze situation, as no less than 8.8% of the stock's float is dedicated to short interest. At the equity's average daily volume, it would take nearly nine days for all of these bearish bets to be repurchased. However, today's volume is anything but typical. The stock's average daily trading volume is fewer than 500,000 shares -- and the intraday total already stands at 3.48 million.

Taking a closer look at the charts, AUXL recently reclaimed its 80-day moving average, which could now resume its prior role as support. Plus, today's surge has propelled the stock back into the black for 2012. The year-to-date breakeven stands at $19.93, so the freshly toppled $20 level should play a key role for AUXL going forward.

Daily Chart of AUXL since November 2011 With 80-Day Moving Average


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