Options Traders Should Consider This Hot Drug Stock

SAGE options are attractively priced

Managing Editor
Jan 2, 2018 at 12:29 PM
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SAGE Therapeutics Inc (NASDAQ:SAGE) had a rip-roaring end to 2017, tacking on 78% in December, and touching an all-time high of $173.36 on Dec. 8. It appears the momentum might spill over into 2018, with the drug stock sending up a signal to buy short-term options right now.

While SAGE stock vaulted up the charts, its short-term options prices remained in the proverbial basement. The equity's Schaeffer's Volatility Index (SVI) of 79% is higher than just 9% of all others from the past year, pointing to relatively attractive short-term premiums amid muted volatility expectations.

The last time SAGE Therapeutics stock was flirting with 52-week highs and sported a low SVI, the shares went on to rally one month later, according to data from Schaeffer's Senior Quantitative Analyst Rocky White. Specifically, SAGE stock averaged a one-month gain of 11.95% after its last signal of this type. A similar surge from current levels would place the shares around $182, a record high.

Today, the biotech stock is down a quiet 0.5% to trade at $163.88. The equity has tacked on an impressive 222% over the last 52-weeks, riding an early December bull-gap following upbeat drug trial results its depression drug.

A short squeeze could provide more fuel for the SAGE's run. Short interest increased by 24.7% during the last two reporting periods to 4.01 million shares, the highest point since mid-September. This represents a healthy 12% of SAGE's total available float. 

 

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