Omeros Corporation (OMER) Bucks Biotech Sell-Off

Omeros Corporation (NASDAQ:OMER) will begin a late-stage study of its atypical hemolytic uremic syndrome treatment

Mar 8, 2016 at 12:22 PM
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Despite a broader sell-off of biotechnology stocks -- per a 2.2% decline in the iShares NASDAQ Biotechnology Index ETF (NASDAQ:IBB) -- drugmaker Omeros Corporation (NASDAQ:OMER) is soaring on news the company will kick off a Phase 3 study for OMS721 -- its drug used to treat atypical hemolytic uremic syndrome. Additionally, OMER reported a slimmer-than-expected fourth-quarter loss. Against this backdrop, the stock is up 18.6% at $15.40 -- on track for its biggest one-day percentage gain in six months -- and call volume has jumped to seven times the average intraday rate.

While OMER option volume is relatively light on an absolute basis -- just over 1,300 total contracts have traded so far today -- calls are outpacing puts by a 17-to-1 margin. This is just more of the same, as evidenced by the stock's top-heavy 20-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 7.21.

Outside of the options arena, however, sentiment among traders is skewed toward the skeptical side. Specifically, short interest accounts for nearly 27% of OMER's available float, or 39.3 times the average daily trading volume. As such, it's possible some of today's bull gap is a result of shorts covering. Plus, a portion of the recent call buying -- particularly at out-of-the-money strikes -- could be a result of shorts hedging their bearish bets.

On the charts, Omeros Corporation (NASDAQ:OMER) has been a long-term laggard, losing 49% since hitting a record high of $30.23 in mid-August. What's more, today's rally is stalling out near the $16 mark -- a level that served as resistance in late 2015.

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