Vertex Pharmaceuticals Incorporated (VRTX) Turns Up the Heat on Bears

Vertex Pharmaceuticals Incorporated's (VRTX) cystic fibrosis drug got the green light from the FDA

by Alex Eppstein

Published on Jul 2, 2015 at 1:40 PM
Updated on Jun 24, 2020 at 10:16 AM

Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) shares shot higher today -- but are currently halted at $130.90 -- on news that the company's cystic fibrosis therapy, Orkambi, received Food and Drug Administration (FDA) approval. With its intraday lead approaching 4%, the stock has advanced 32.5% year-over-year -- though it's struggled in recent months in the $130-$133 neighborhood. Amid this recent churn, option traders have gravitated toward long puts.

Diving right in, during the last 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 1.36 puts for every call. This ratio ranks in the 82nd percentile of its annual range, suggesting traders have bought to open puts over calls at a faster-than-usual pace lately.

Further reflecting this bias toward puts is VRTX's Schaeffer's put/call open interest ratio (SOIR) of 1.31. Not only does this SOIR indicate short-term put open interest outweighs call open interest, but it also rests above 79% of comparable readings from the previous 12 months.

Analysts are tilted in a skeptical direction, as well. Over half of the brokerages covering Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) have doled out tepid "hold" ratings. What's more, the stock's average 12-month price target of $140.10 is just 7% above the current perch -- though it does represent uncharted territory for VRTX.

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