Sarepta Therapeutics Stock Eyes Best Day in 3 Years on FDA Reversal

It would take shorts 11 days to cover their bearish bets

by Emma Duncan

Published on Dec 13, 2019 at 11:31 AM
Updated on Jun 24, 2020 at 10:16 AM

Drug maker Sarepta Therapeutics Inc (NASDAQ:SRPT) is soaring this morning, up 33% at $132.50. The company's Duchenne Muscular Dystrophy (DMD) treatment was approved by the Food and Drug Administration (FDA), a surprise considering the FDA rejected the drug back in August. Sarepta had repealed the FDA's decision, leading to today's shocking win. Also of note, Needham hiked its price target to $182 from $170.

Today's impressive bull gap is not only filling the equity's aforementioned August sell-off, but it now has SRPT pacing toward its largest one-day jump since September 2016. In the current quarter alone, Sarepta stock has added 76%.

Short interest dropped just over 5% during the past two reporting periods, but now accounts for a whopping 20.8% of the stock's total available float. At Sarepta's average pace of daily trading, it would take short sellers 11 days to buy back their bearish bets.

Digging deeper, now looks like an attractive time for those wanting to speculate on SRPT's next move with options. The drug concern's Schaeffer's Volatility Index (SVI) of 51% sits higher than just 16% of readings from the past year.

Lastly, the stock’s Schaeffer's put/call open interest ratio (SOIR) of 0.39 ranks 11 percentage points from an annual low, showing there is an unusual call-skew in the front three-months' series. In fact, the January 2020 120- and 110-strike calls are holding the two most popular open interest positions this afternoon.

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