Isis Pharmaceuticals, Inc. (ISIS) Pop Has Option Bulls Wanting More

ISIS Pharmaceuticals, Inc. (ISIS) calls are trading at four times the intraday average

Jan 5, 2015 at 3:08 PM
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ISIS Pharmaceuticals, Inc. (NASDAQ:ISIS) is soaring today, after announcing a new drug-licensing deal with Janssen Biotech Inc., a division of Johnson & Johnson (NYSE:JNJ). At last check, the stock was up 9.3% at $67.28, after earlier topping out at $68.43 -- its highest perch on record. In the options pits, calls are trading at almost four times what's typically seen at this point in the day, with a number of speculators eyeing more upside over the next two weeks.

Seeing notable action once again are ISIS' January 2015 65- and 70-strike calls, and it appears a number of these positions are being bought to open. By initiating the long calls, speculators expect the stock to settle north of the respective strikes at the close on Friday, Jan. 16, when front-month options expire. Delta on these calls is docked at 0.64 and 0.38, respectively, suggesting a 64% and 38% chance they will be in the money at expiration.

Heading into today's session, ISIS was boasting an already impressive 58% year-over-year lead, and more recently, has enjoyed a steady lift higher from its 20-day moving average since mid-October. In spite of this technical tenacity, there are still pockets of skepticism found throughout the Street.

Short interest, for example, accounts for 12.5% of the stock's available float, representing more than a week's worth of pent-up buying demand, at the security's average pace of trading. Elsewhere, ISIS' consensus 12-month price target of $55.90 stands at a steep discount to current trading levels. Should ISIS Pharmaceuticals, Inc. (NASDAQ:ISIS) continue to gain ground on the charts, a short-covering rally and/or a round of price-target hikes could add fuel to its fire.

Daily Chart of ISIS Since January 2014 With 20-Day Moving Average

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