Bearish Sentiment Dominates Stumbling Endo International plc (ENDP)

Endo International plc - Ordinary Shares (NASDAQ:ENDP) is falling in line with Valeant Pharmaceuticals Intl Inc (NYSE:VRX) after the Citron Research short seller report

by Josh Selway

Published on Oct 22, 2015 at 12:11 PM
Updated on Jun 24, 2020 at 10:16 AM

Many biotech stocks are struggling in light of the damning report on Valeant Pharmaceuticals Intl Inc (NYSE:VRX) from Citron Research. One stock taking a particular beating is Endo International plc - Ordinary Shares (NASDAQ:ENDP). The equity has shed 7.8% at $50.24, and earlier hit a nearly two-year low of $48.82. What's more, the stock has found a spot on the short-sale restricted list. Against this backdrop, traders are heading to the option pits. 

Despite the stock's decline, speculators are actually targeting calls, with volume running at five times the average pace. However, the two most popular options, the November 53 call and the January 2016 60-strike call, appear to be seeing sell-to-open activity. In other words, these traders expect ENDP to continue trading below the strikes through the contracts' respective expiration dates. 

It's nothing new to see a pessimistic outlook from ENDP speculators. The stock's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.71 is only 1 percentage point from an annual high. Put differently, puts have been bought to open over calls at a much faster-than-usual rate in recent weeks. 

Even more striking, though, is a shift that's taken place more recently in ENDP's options arena. Specifically, of all the stocks we cover at Schaeffer's, ENDP saw the third biggest percentage jump in its Schaeffer's put/call open interest ratio (SOIR), which measures open interest among stocks expiring within three months. Overnight, this ratio jumped from 0.35 to 0.51 -- a 44% increase. In other words, short-term traders have taken a sudden interest in the stock's puts. 

Bearish sentiment is seen outside the options pits, as well. Short interest has been rising steadily on ENDP, jumping 24% during the most recent reporting period alone. 

None of this can really come as a shock, though, when looking at the charts. Coming into today, Endo International plc - Ordinary Shares (NASDAQ:ENDP) had trailed the broader S&P 500 Index (SPX) by 34 percentage points during the past three months. 

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