The drug stock is ripe for a short squeeze, too
The shares of Viking Therapeutics Inc (NASDAQ:VKTX) are up 7.5% to trade at $10.89 this morning after the pharma company's non-alcoholic fatty liver disease (NASH) drug met the main goals for its mid-stage study. On the charts, the stock has been churning below the $9.50 level for most of 2019. The shares gapped higher in late March after an ambitious bull note, but the overhead 200-day moving average loomed. Today, VKTX is set to topple that trendline, bringing its year-to-date gain to around 40%.
A short squeeze could keep the wind at the equity's back. The 32.10 million shares sold short represents a whopping 50% of VKTX's total available float. At the stock's average pace of trading, it would take shorts nearly nine days to buy back their bearish bets.
In the options pits, calls reign in popularity. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows speculative players have bought to open 7,394 calls in the last 10 sessions, compared to just 818 puts. Plus, the resulting 10-day call/put volume ratio ranks in the 74th percentile of its annual range, showing unusual demand for long calls over puts in recent weeks.
Those wanting to speculate on the drug stock should also know that its Schaeffer's Volatility Index (SVI) of 103% ranks in the 19th percentile of its annual range. In other words, volatility expectations appear low, suggesting it's an attractive time to buy short-term options premium.