Schaeffer's 43rd Anniversary Stock Picks in 2024

Tesla Stock Lower After Musk Tweets Draw SEC Scrutiny

A rival drugmaker's HIV breakthrough is weighing on GILD stock

Managing Editor
Aug 15, 2018 at 3:03 PM
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Stocks are getting clobbered today, dragged down by declining FAANG stocks and oil prices. Looking at individual names, electric vehicle maker Tesla Inc (NASDAQ:TSLA), weight loss concern Weight Watchers International, Inc. (NYSE:WTW), and drug stock Gilead Sciences, Inc. (NASDAQ:GILD) are all lower. Here's a closer look at what's driving shares of TSLA, WTW, and GILD today.

TSLA Stock Sell-Off Continues

TSLA stock is down 2.7% to trade at $338.16, on reports the company was subpoenaed by the U.S. Securities and Exchange Commission (SEC) in regard to CEO Elon Musk's tweets about taking Tesla private. In addition, Goldman Sachs, who Musk named as an adviser, moved its rating on Tesla to "not rated" from its previous "sell" recommendation. TSLA stock has had a volatile run amid these headlines, shedding 9% in the past week.

In the options pits, near-term traders have preferred puts. The security's Schaeffer's put/call open interest ratio (SOIR) of 1.71 ranks higher than 86% of all other readings from the past year, meaning speculators are more put-heavy than usual among options expiring in three months or less. 

WTW Extends Pullback After Top Investor Trims Stake

Weight Watchers stock is down 8.3% to trade at $70.94, after an SEC filing showed Artal Luxembourg, the company's top investor, reduced its holdings by 9%. WTW stock has pulled back significantly since nabbing a record high of $105.73 on June 20. Today's drop has the shares on track to close below their 160-day moving average for the first time since January 2017. 

Despite the pullback this summer, analysts remain committed to the Oprah-backed stock. Of the eight brokerages covering WTW, seven rate it a "strong buy," and its average 12-month price target sits up at $116, a 63.5% premium to its current perch.  

GILD Stock Lower After GSK Drug Data

Gilead Sciences stock is down 3.2% to trade at $74.86, after rival GlaxoSmithKline (GSK) unveiled upbeat data for its HIV injection treatment. In addition, Gilead's C-suite shakeup continues, after the company said its chief medical officer is leaving. Today's drop has GILD shares on track for their worst day since an earnings-induced bear gap in early May, and breaching their formerly supportive 40-day moving average. 

Options traders have been almost targeting GILD calls over puts at a quicker-than-usual clip lately. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows 11,299 calls bought to open in the past 10 days, compared to just 2,346 puts. The resultant call/put volume ratio of 4.82 ranks in the 92nd percentile of its annual range.

Meanwhile, volatility expectations are near extreme lows following the company's late-July earnings report. This is based on the stock's Schaeffer's Volatility Index (SVI) of 20% -- just 7 percentage points from a 12-month low. Furthermore, the drug stock has been a good target for premium buyers during the past year. That's according to its Schaeffer's Volatility Scorecard (SVS) of 94 out of 100, which shows it's tended to make much bigger-than-expected moves on the charts compared to what the options market was expecting.


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