Aerie Pharmaceuticals Stock Jumps on FDA Drug Approval

A number of call traders bought options in previous sessions

Mar 13, 2019 at 9:29 AM
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Aerie Pharmaceuticals Inc (NASDAQ:AERI) is trading up 7.8% this morning at $49.38, after the company said the Food and Drug Administration (FDA) approved Rocklatan, a treatment for glaucoma patients. This will be the second drug to hit the market for AERI, and an analyst at Stifel expects FDA approval for Rocklatan to provide a boost to Aerie's revenues.

Today's price action puts the shares above the 32-week moving average for the first time since October. This trendline, along with the $48 level, has been acting as a ceiling in recent weeks. Aerie Pharmaceuticals stock suffered heavy selling in the second half of 2018, falling from a July record high of $74.75 to December's low of $32.18.

Today's gains could be good news for options traders. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows more than five calls were bought to open for every put during the past 10 days. The March 50 call saw the largest increase in open interest during this time span, and buy-to-open activity was confirmed here. The March 55 and April 50 calls were also popular.

Meanwhile, there was recently a sharp decline in short interest on AERI, with the number of shorted sales fall 23% in the last two reporting periods. But with almost 12% of the float still held by these bears, there's potential for more short covering going forward.

Analysts are certainly on board. That is, six of the seven brokerage firms in coverage have "buy" or "strong buy" recommendations, and there are zero "sells" on the books. Even more telling is the average 12-month price target from this group, which stands all the way up at $80.70.

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