Oramed Pharmaceuticals, Inc. (ORMP) Drug News Sparks Profit-Taking in the Options Pits

Oramed Pharmaceuticals, Inc. (NASDAQ:ORMP) surged higher out of the gate following upbeat data on its insulin drug, sparking possible profit-taking among call option traders

May 18, 2016 at 10:34 AM
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Oramed Pharmaceuticals, Inc. (NASDAQ:ORMP) stock popped more than 16% out of the gate, and briefly traded above recent resistance at the round-number $10 level, following highly anticipated news on the company's oral insulin drug, ORMD-0801. The pharmaceutical firm announced this morning that the treatment met goals in a Phase II trial in patients with type 2 diabetes, and must now move on to a Phase III trial before being submitted for approval. However, the drug data -- expected to be potentially "transformative" -- may have already been priced in to ORMP shares, which have erased their gains to sit 1.1% lower at $8.93, and it looks like call options holders may have cashed out just in time.

As of yesterday, call open interest on ORMP was at an annual high. Most of the calls resided at the overhead May 10 strike. Today, ORMP calls are trading at 60 times the average intraday pace, and it looks like possible sell-to-close action occurred at the May 10 call within the first few minutes of trading, when the stock was briefly in double-digit territory -- and within a chip-shot of new annual highs.

However, bearish bets have picked up steam on Oramed Pharmaceuticals, Inc. (NASDAQ:ORMP), with put volume hitting an annual high yesterday. The stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio shows 1.63 puts bought to open for each call during the past two weeks, to be precise. Plus, while the stock is currently seated on the short-sale restricted list, short interest account for more than two weeks' worth of trading, at ORMP's average daily volume. 

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