2 Biotech Stocks for Short-Term Call Buyers

Options look attractive on FOLD and FLXN

Oct 19, 2017 at 12:56 PM
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While the broader stock market takes a breather today, we're searching for names bullish options traders may want to target. Based on data provided by Schaeffer's Senior Quantitative Analyst Rocky White, we landed on biotech stocks Amicus Therapeutics, Inc. (NASDAQ:FOLD) and Flexion Therapeutics Inc (NASDAQ:FLXN). Not only are the shares flashing potential "buy" signals, but options data suggests it could be a good time to buy short-term contracts.

For example, White notes that FOLD stock recently pulled back within one standard deviation of its 80-day moving average, after a lengthy stay above it. During the past three years, this has occurred five other times, and four of these times resulted in a one-month gain for the shares, with an average return of 4.4%. The equity has already added roughly 180% in 2017 alone thanks in part to upbeat drug data, and was last seen trading at $13.96.

Analysts are overwhelmingly bullish on the security. All six covering brokerage firms have a "strong buy" rating, and Amicus' average 12-month price target of $18.93 represents a a 35.6% premium to current levels. In fact, J.P. Morgan Securities upped its FOLD price target to $19 from $15 this past Tuesday.

Premium buyers should certainly consider FOLD, based on its Schaeffer's Volatility Index (SVI) of 62%. This reading ranks in the bottom quartile of its annual range, hinting at lower-than-usual volatility expectations for near-term options.

Meanwhile, Flexion Therapeutics stock has also pulled back to its 80-day moving average. Similar setups in the past three years have resulted in an average 21-day gain of 9.5%, with the shares closing higher two-thirds of the time. FLXN is trading lower today at $23.55, but still sports a year-to-date lead of 24%.

Like its fellow drugmaker, it has six analysts with coverage, and each of them say to buy the security. Moreover, the equity has a consensus 12-month price target of $39.50, standing at a 67.5% premium to its current perch.

Near-term options contracts also look attractive for FLXN. The stock's SVI of 55% ranks only 15 percentage points from an annual low. It looks like some traders have taken note, though, since total open interest on Flexion closed last night at a 52-week high of 49,210 contracts.

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