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Jazz Pharmaceuticals plc put buyers are banking on a short-term pullback
Jazz Pharmaceuticals plc (NASDAQ:JAZZ) touched a record high of $180 out of the gate this morning, following a well-received earnings report -- which included better-than-expected full-year guidance -- and a subsequent round of price-target hikes. However, at last check, the shares have pared most of their earlier gains -- up just 0.8% at $169.75 -- and one group of options traders sees fairly significant downside ahead.
Diving right in, options are crossing at an accelerated rate this afternoon -- especially on the put side, where the roughly 2,700 contracts on the tape outstrip the expected intraday volume by an 11-to-1 margin. Accounting for the majority of this put activity is the November 160 strike, where nearly 2,200 contracts have been exchanged.
The majority of the out-of-the-money November 160 puts traded so far have done so at the ask price, suggesting they're being bought. What's more, with just 1,516 contracts in open interest, it's safe to assume some of the puts are being freshly minted. Long story short, these speculators expect JAZZ to plunge below $160 by the close on Friday, Nov. 21, when front-month options expire.
Taking a step back, today's preference for Jazz Pharmaceuticals plc (NASDAQ:JAZZ) put buying falls in line with a recent trend. Specifically, the stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 4.89 ranks in the bearishly skewed 97th percentile of its annual range. Of course, given JAZZ's longer-term uptrend -- the stock has tacked on about 34% this year -- a portion of these long puts may have been initiated by shareholders seeking a pre-earnings hedge.