Option traders are betting on more downside for the sinking shares
The shares of CRISPR Therapeutics AG (NASDAQ:CRSP) are getting hammered today, after the company entered an agreement with Germany's ProBioGen to research and develop gene-editing technology. Meanwhile, Citigroup poured salt in the proverbial CRSP wounds, downgrading the stock to "sell" from "neutral," and cutting its price target by $7 to $21 -- representing a 43% discount to the equity's close of $37.13 on Friday. At last check, the shares were down 13% to trade at $32.31, and put options are more active than usual.
CRSP stock is now set to snap a four-day winning streak, and is pacing for its worst day since Dec. 21, when the equity touched an annual low of $22.22. The stock has been in a channel of lower highs and lows since peaking at $73.90 in late May, giving up more than half its value in that time frame, with rebound attempts capped by its 100-day moving average.
Already today, about 530 CRISPR Therapeutics put options have changed hands -- twice the average intraday pace. It appears bears are buying to open the February 32 put, which will become more profitable the further the stock slides beneath the $32 level by the close on Friday, Feb. 15, when the newly front-month options expire.
Today's appetite for puts runs counter to the recent trend, however. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio stands at 3.79, indicating traders have bought to open nearly four CRSP calls for every put in the past two weeks. What's more, this ratio is in the 83rd percentile of its annual range, pointing to a healthier-than-usual appetite for bullish bets over bearish of late.
The security could be at risk of more negative analyst attention, too. Currently, seven of the 11 brokerage firms following CRSP maintain "buy" or better endorsements, with just one "sell" or worse on the books. Plus, the consensus 12-month price target of $63.72 is nearly double the equity's current price, leaving the door open for additional price-target cuts on the horizon.