Exelixis Options Cheap After Cancer Drug Scores Key FDA Win

EXEL's Cabometyx has been approved for expanded usage

Dec 20, 2017 at 9:26 AM
facebook twitter linkedin

The U.S. Food and Drug Administration (FDA) yesterday expanded the use of Exelixis, Inc.'s (NASDAQ:EXEL) drug, Cabometyx, to treat those with advanced kidney cancer. The decision comes well ahead of the FDA's mid-February action date, and earned EXEL stock a price-target hike to $38 from $35 at SunTrust Robinson. RBC, meanwhile, projected a $1 billion market opportunity for the biotech.

In reaction, EXEL shares are trading up 4.5% ahead of the bell. The stock's had a standout year, up 78.9% so far in 2017 based on last night's close at $26.68. The security's momentum has stalled since a mid-October bull gap -- sparked by positive Cabometyx data -- but has found a firm foothold atop its 140-day moving average, which contained a late-September retreat, as well.

A capitulation from short sellers could certainly keep this rally going. As of the Dec. 1 reporting period, 18.59 million EXEL shares were sold short -- representing more than nine days' worth of pent-up buying demand, at the stock's average pace of trading.

And while relatively few options traders have targeted the drug stock -- total open interest of 109,856 contracts ranks in the 27th annual percentile -- it's an attractive time to buy premium on Exelixis. While EXEL's Schaeffer's Volatility Index (SVI) of 45% ranks in the 4th percentile of its annual range, the equity's 30-day at-the-money implied volatility of 45.3% ranks below 95% of comparable readings taken in the past year. These two volatility indicators suggest low expectations are being priced into short-term contracts.





These investors are using the market's volatility to their advantage and scoring triple-digit gains on many of their trades.

Even in today's sideways bear market, this trading strategy has continued to provide consistency and profitability to a small group of investors. By using this approach, these traders are removing directional risk and still hitting triple-digit returns. If you want access to this strategy, and lower risk with higher returns sounds good to you, then don't wait another minute.

Join us now to receive our next trades the moment they come out!


Common mistakes options traders make


Special Offers from Schaeffer's Trading Partners