Bulls Jump on Tandem Diabetes Care Stock Rally

Call buying has been popular on Tandem Diabetes Care

Aug 24, 2018 at 9:14 AM
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Insulin pump specialist Tandem Diabetes Care Inc (NASDAQ:TNDM) has been soaring higher since February, rising from around $3, to a close of $38.61 yesterday -- its highest settling price since late 2016. The shares are set to add another 2% at the open following an upgrade to "neutral" from "underperform" at BofA-Merrill Lynch, which cited an improved balance sheet.

Most of Wall Street was already behind the healthcare stock. Coming into today, five of six covering analysts had "strong buy" ratings on TNDM. Still, the shares have stormed past their average 12-month price target of $32.14, hinting at potential for more bull notes going forward.

Bullish options traders have also jumped on for the ride, with almost 4,300 calls bought to open in the past 10 days across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), compared to just 381 puts. It's been a tremendous run for those buying premium on TNDM, since its Schaeffer's Volatility Scorecard (SVS) sits up at 100, the highest reading possible, showing a strong tendency to exceed volatility expectations over the past year.

Looking closer, peak open interest sits at the September 30 call, where 3,364 contracts sit. Next in line is the November 35 call, followed by the September 40 call. Tandem Diabetes Care bulls are dealing with an overbought stock, however, based on the 14-day Relative Strength Index (RSI) of 78.

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