BioCryst Pharmaceuticals, Inc. (BCRX) Zooms Higher on Zika Data

BioCryst Pharmaceuticals, Inc. (BCRX) is rallying on Zika drug data, possibly to the delight of recent option buyers

by Kirra Fedyszyn

Published on Mar 7, 2016 at 12:33 PM
Updated on Jun 24, 2020 at 10:16 AM

Drugmaker BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX) is surging 22.7% to $3.17 today, after announcing that a preclinical study in mice showed promising results of an antiviral treatment for the Zika virus. The company is presenting these trial results at a meeting of the World Health Organization (WHO) in Geneva, Switzerland, this week. And while the stock had a rough start to 2016, a recent crop of option buyers could be cheering today's rally.

BCRX is down 69% year-to-date. Ugly trial data from the company's OPuS-2 treatment for a rare genetic disorder clobbered the shares in early February, sending them down 71%  in a single session. A round of bearish brokerage notes -- and a drop to two-year lows -- followed, but the equity has added roughly 30% so far in March.

However, Wall Street remains wary. Of the nine brokerage firms following the stock, only three rate it better than a "hold." And short interest on BCRX is elevated, representing more than 15% of the security's total available float.

Option traders, however, have picked up BCRX calls over puts at a faster-than-usual clip during the past two weeks, albeit at relatively low absolute volumes. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio stands at 196 -- indicating that traders have overwhelmingly bought to open BCRX calls over puts. Moreover, this ratio is higher than 97% of all readings taken in the past year. However, considering the aforementioned short interest, it's possible that some of that call buying -- particularly at out-of-the-money strikes -- could be attributable to shorts looking for an options hedge.

Whatever the motive, this could be an enticing time to pick up BCRX's short-term options. The stock has a Schaeffer's Volatility Index (SVI) of 150% -- in the mild 25th percentile of its annual range. That means near-term premium on BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX) options can be bought relatively cheaply at the moment.

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