It's a Good Time to Buy Hologic Put Options

Short-term Hologic puts are pricing in lower volatility expectations than calls at the moment

Nov 24, 2017 at 10:51 AM
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Hologic, Inc. (NASDAQ:HOLX) said it has received 510(k) clearance from the U.S. Food and Drug Administration (FDA) for its Quantra 2.2 breast density assessment software -- used in breast cancer screenings. Despite an initial uptick at the open, HOLX stock is failing to capitalize on the news, last seen fractionally lower at $40.87. As the shares continue to struggle at a key technical juncture, skeptical traders are likely breathing a sigh of relief.

Taking a closer look at Hologic stock's chart, the shares are currently trading just above their 2017 breakeven mark of $40.12, which roughly coincides with their 120-day moving average. The equity climbed back into positive year-to-date territory after bouncing from their mid-October annual low near $36. However, HOLX appears to be running out of steam near $40.90, home to its 140-day moving average and near its early August bear-gap highs.

holx stock daily chart nov 24

Short sellers, meanwhile, have been actively betting against the healthcare stock. In the past two reporting periods, short interest on Hologic has spiked 50% to 10.84 million shares -- the most since January 2016. This still only represents 4% of the equity's available float, or 4 times HOLX's average daily pace of trading.

Options traders, on the other hand, have remained relatively quiet on HOLX, with just 365 total contracts bought to open on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) in the past 10 days, though most of the action occurred on the put side. Overall, total HOLX open interest is comprised of 23,040 contracts, and is docked in the middling 51st annual percentile.

Those looking to trade options on HOLX may want to consider short-term puts, considering they're priced at relatively attractive levels at the moment. The stock's Schaeffer's Volatility Index (SVI) of 21% ranks in the 8th annual percentile, suggesting near-term options are inexpensive, from a volatility standpoint. Plus, Hologic's 30-day at-the-money implied volatility skew of 8.3% ranks lower than 75% of all comparable readings, meaning put options are pricing in lower volatility expectations, compared to call options.


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