Drug Stock Drops on Reports of Company Layoffs

NVO has shed 23% since its late-January highs

Managing Editor
Jun 8, 2018 at 10:22 AM
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Danish pharmaceutical firm Novo Nordisk A/S (NYSE:NVO) is down 2.3% at $44.97 in early trading, after media name Borsen reported the company is considering laying off up to 3,000 workers and dropping its long-term financial targets -- citing headwinds from new U.S. legislation that could impact drug pricing. In May, the company said the law will cause 2019 sales to fall up to 2%. 

NVO has been selling off since its late-January two-year peak near $58.40, down almost 23%. More recently, the stock's breakout attempts have been quickly contained near the round $50 mark since April, which currently coincides with NVO's 200-day moving average.

In the options pits, traders have been exceptionally bearish of late, albeit amid relatively low absolute volume. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) showing NVO with a 10-day put/call volume ratio of 1.80, ranking in the 86th annual percentile. This lofty ratio suggests that puts have been purchased over calls at a faster-than-usual clip during the past two weeks. 

It's a prime time to purchase premium on NVO stock options, too. The equity currently sports a Schaeffer's Volatility Index (SVI) of 24%, which ranks in the 29th percentile of its annual range. This suggests that near-term options are pricing in relatively low volatility expectations at the moment, which could help maximize the benefit of leverage for premium buyers.
 

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