Put Traders Pile On During bluebird bio Stock Losing Streak

bluebird bio has closed lower in six straight sessions

Mar 21, 2018 at 9:42 AM
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bluebird bio Inc (NASDAQ:BLUE) has been a major outperformer over the past year, but the stock has struggled since its March 13 record high of $236.17. In fact, BLUE shares have suffered six straight losses, including a 6.9% pullback last Friday. While this represents the equity's longest losing streak in at least a year, Morgan Stanley is keeping the faith in the drugmaker.

Specifically, the brokerage firm weighed in on several drug stocks this morning, and raised its price target on bluebird bio to $209 from $152. This matches the general opinion on the Street, where 12 of 20 covering analysts have "strong buy" ratings on the stock, and the average 12-month price target stands all the way up at $220.78.

Sentiment among options traders has been much more bearish. In fact, BLUE's 10-day put/call volume ratio across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) has jumped from 0.44 to 1.39 over the past week. That current reading actually ranks in the 100th percentile of the annual range, showing put buying has never been more popular relative to call buying over the past year.

Looking closer, traders have targeted the front-month April series. The most popular contract over the past two weeks, based on open interest added, was the April 180 put, followed by the 200-, 195-, and 190-strike puts in the same series. Data points to mostly buy-to-open activity for each of these options, so traders have been positioning for another drop in the share price.

But betting against the security could be a bad idea. As alluded to, bluebird bio stock has been a huge winner, more than doubling in value over the past year. Plus, the shares yesterday pared losses to gravitate back to the $190 level, home to the 80-day moving average. BLUE was last seen trading up 1.1% at $191.40.

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