Presidents Day May Be Bad News For Align Technology, AstraZeneca Shares

Options traders have very different expectations for healthcare stocks Align Technology, Inc. (ALGN) and AstraZeneca plc (ADR) (AZN)

by Josh Selway |

Published on Feb 17, 2017 at 11:13 AM
Updated on Feb 17, 2017 at 1:31 PM

While these two retail stocks may be set to benefit from next week's holiday-shortened slate, the broader market could struggle after Presidents Day. Schaeffer's Senior Quantitative Analyst Rocky White identified the 25 stocks that have performed the worst around the holiday -- which, as you can see on the chart below, may be bad news for bank shares. Meanwhile, we have our eye on two healthcare stocks from the list: Align Technology, Inc. (NASDAQ:ALGN) and AstraZeneca plc (ADR) (NYSE:AZN). As we'll explore below, options traders have been taking wildly different approaches to shares of ALGN and AZN. 

worst stocks presidents day

Align Technology Put Options Popular in Recent Weeks

ALGN has performed well on the charts during the past year, gaining 59.5% to trade at $100.28. But the shares have been struggling to make a meaningful move into triple-digit territory since December, and next week may not help the cause. Specifically, the shares have only closed Presidents Day week higher 20% of the time in the past decade, averaging a 1.5% decline. 

Options traders are certainly preparing for more losses. In fact, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows almost 22 puts have been bought to open for every call during the past two weeks, with the resulting 10-day put/call volume ratio of 21.94 sitting just 2 percentage points from an annual high. 

However, the most popular Align Technology, Inc. option during the past two weeks, judging by open interest added, was the March 95 put. Considering how far out of the money this strike is, there's a chance some of the positions purchased here were the work of shareholders protecting against an unexpected drop. Either way, it's an attractive time to buy the stock's near-term options, according to its Schaeffer's Volatility Index (SVI) of 21%, which ranks below 94% of all other readings from the past year. In other words, the options market is pricing in low volatility expectations at the moment. 

AstraZeneca Option Bulls Place Long-Term Bets

As for AZN, its technical performance has been much less impressive than ALGN. In fact, the shares have been trending lower since mid-2014, and are now back below the round $30 level, which is home to their 12-month breakeven level. Meanwhile, the stock has only ended the holiday week higher 20% of the time in 10 years, averaging a loss of 1%. AZN was trading near $29.21 at last check, up 1.6% on upbeat trial data for breast cancer treatment Lynparza, as well as a price-target hike at Jefferies. 

Options traders apparently have high hopes for the drug stock. AZN sports a 10-day call/put volume ratio of 9.64 at the ISE, CBOE, and PHLX, which ranks in the 73rd annual percentile. Digging deeper, the September 30 and 32.50 calls saw the largest increases in open interest during the past two weeks, with data from the major exchanges confirming substantial buy-to-open activity at the latter strike. So, traders are apparently gearing up for a move higher -- but not necessarily in the near term. 

Still, like ALGN, it's a good time to target AstraZeneca plc's short-term options. The stock sports an SVI of 23%, putting it below 91% of the past year's readings, and hinting at historically muted volatility expectations.
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