Space Stock Floats in Place Despite Successful Test Flight

Call traders could be targeting options hedges

by Fernanda Horner

Published on Jun 26, 2020 at 11:26 AM
Updated on Jun 26, 2020 at 11:33 AM

The shares of Virgin Galactic Holdings Inc (NYSE: SPCE) are in focus this morning, after the British spaceflight company announced the success of a second SpaceShipTwo test flight from Spaceport America in New Mexico. This test marks another milestone in Virgin Galactic's progress toward offering suborbital flights to tourists and science missions. 

Since dipping below $10 in mid-March, SPCE has been trading sideways and has a long way to go before reclaiming its pre-pandemic peak of $42.49 in February. During this multi-month consolidation, the $17.50 level has served as an overhead hangar, while the shares' 200-day moving average --located just below the $15 level -- has kept the damage in check. Longer term, the equity is up 32.1% year-to-date. 

Analysts were majorly optimistic toward SPCE coming into today, with the two in coverage calling it a "buy" or better. Meanwhile, the consensus 12-month price target of $25 is a whopping 63.8% premium to current levels. However, short sellers are building their positions, too. In the last two reporting periods, short interest rose 20%, with the 29.98 million shares sold short representing a mind-blowing 56% of the stock's available float. 

In the options pits, calls are extremely popular. SPCE sports a 10-day call/put volume ratio of 4.24 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), indicating calls out number puts by a more than four-to-one ratio in the last two weeks. Given the amount of short interest tied up in the equity, it's possible some of this call buying could be shorts seeking an options hedge.


A Schaeffer's 39th Anniversary Exclusive!

8 Top Stock Picks for 2020

Access your FREE insider report before it's too late!


  
 
 

Partnercenter