Stars May Be Aligning for VRTX Options Traders

Vertex Pharmaceuticals stock is the best to own during the second quarter

May 25, 2017 at 12:57 PM
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The shares of drugmaker Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) have been bumping up against resistance in the $120-$122 neighborhood -- roughly double VRTX stock's 2014 lows, and an area of support when the shares were on the verge of a breakout to record highs back in 2015. However, if recent history is any indicator, Vertex stock could surge in the short term -- and options traders may want to strike now.

VRTX Stock Testing Historically Notable Moving Average

VRTX stock gapped higher in late March, thanks to encouraging data on Vertex's cystic fibrosis treatment. The shares subsequently touched an annual high of $121.96 on May 2, but have managed just one close above the $120 level. The stock is now testing support at its ascending 40-day moving average, which has been a bullish signal in the past. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, after VRTX stock's last eight tests of the 40-day, the shares went on to average a one-month gain of 3.17%, and were higher 63% of the time. From VRTX stock's current perch at $118.70, a 3.17% gain would have the shares at around $122.50 -- above recent resistance and in new-high territory.

vertex pharmaceuticals vrtx stock chart


VRTX Among Best Stocks, Options to Own Right Now

Meanwhile, Vertex Pharmaceuticals is historically the best stock to own in the second quarter, averaging a gain of 18.5% during the past 10 years. So far this quarter, Vertex has added 8.5%. What's more, VRTX stock also tends out outperform in short trading weeks -- which could bode well for the equity next week, after Memorial Day. According to recent data from White, VRTX has averaged a 1.48% gain in short trading weeks, going back to 2010, with a healthy win rate of 61.8%.

Despite the biotech's impressive year-to-date ascent of more than 61%, analysts are only lukewarm toward VRTX. In fact, half of the analysts following VRTX maintain tepid "hold" ratings, leaving the door wide open for potential upgrades to lure more buyers to the table.

Options traders looking to roll the dice on a short-term rally for Vertex stock can do so at a relative discount, too. The equity's Schaeffer's Volatility Index (SVI) of 26% is lower than 95% of all other readings from the past 12 months, indicating VRTX's near-term options are at bargain-basement prices right now, from a historical volatility perspective.
 

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