Mallinckrodt PLC (MNK) Earnings Beat Burns Bears

Mallinckrodt PLC (MNK) reported better-than-expected quarterly earnings, sending the stock higher andburning bears in and outside of the options pits

by Kirra Fedyszyn

Published on May 3, 2016 at 1:03 PM
Updated on Jun 24, 2020 at 10:16 AM

Drugmaker Mallinckrodt PLC (NYSE:MNK) is up 7.4% at $63.47 today -- and is currently one of the top performers on the S&P 500 Index (SPX) -- after the company reported a fiscal second-quarter earnings beat and raised its full-year outlook. But not everyone is happy with the equity's big gains, as bearish sentiment both in and out of the options pits has been running at extreme levels of late.

Specifically, although
short interest has been on the decline since hitting an annual peak in mid-March -- down 8.6% -- it still accounts for more than 11% of MNK's available float. At the stock's average daily volume, it would take more than a week to cover all these pessimistic positions.

In the options pits, meanwhile, MNK currently sports a 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 23.50 -- an annual high. Echoing this put-skewed extreme is the equity's Schaeffer's put/call open interest ratio (SOIR) of 3.43 -- also in the top percentile of its 12-month range. That means the preference for puts among options expiring within three months has never been higher in the last year.

While today's rally has pared MNK's 2016 losses to 15%, there appears to be a glimmer of hope for bearish bettors. Specifically, the shares are once again facing off with resistance in the $65-$70 region, which has been trouble for Mallinckrodt PLC (NYSE:MNK) since last fall.

MNK Daily Chart May 3


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