Are Vital Therapies Inc, Affimed NV Putting Bears on Notice?

Vital Therapies Inc (VTL) and Affimed NV (AFMD) are leading the healthcare sector higher

Oct 15, 2015 at 2:55 PM
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The healthcare sector is red-hot today amid a broad-market rally. Among the top performers are drugmakers Vital Therapies Inc (NASDAQ:VTL) and Affimed NV (NASDAQ:AFMD). Here's a quick look at how these stocks are performing this afternoon, and how traders have been positioning themselves.

VTL was last seen 13% higher at $6.49 -- in what has been a banner week for the shares -- though its catalyst remains unclear. From a longer-term perspective, the equity has struggled -- losing nearly three-quarters of its value on a year-to-date basis.

Not surprisingly, traders have been scooping up bearish bets over bullish at a breakneck pace of late. VTL's 10-day put/call volume ratio across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is 5.41 -- up from 0.91 five sessions ago -- with more than five puts bought to open for every call. Digging deeper, the December 5.50 put has been the most popular strike over that time span, with open interest adding close to 1,500 contracts -- most of which were purchased.

It's more of the same this afternoon. Vital Therapies Inc puts are changing hands at 19times the expected intraday rate. And, despite the stock's intraday gains, traders are buying to open the December 4.50 put in hopes of a sharp reversal below the $4.50 level within the next two months.

Even more impressive, AFMD has spiked over 26% to hover near $7.72 -- bringing it into positive year-to-date territory. In this case, though, the driver is clear -- the firm last night revealed that an existing shareholder recently agreed to buy 3.3 million shares, resulting in a nearly $22 million investment. Based on what's happening on the charts, it's safe to say this development is overshadowing a price-target cut to $7 at Jefferies.

Another safe assumption: Short sellers are feeling the heat. During the latest reporting period, short interest on Affimed NV swelled 11%, and now accounts for 11% of its total float. At the stock's typical trading levels, it would take over one week to buy back these short positions. In other words, there's plenty of sideline cash available to fuel AFMD's fire.


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