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Why Option Bulls are Pouncing On Pharmacyclics, Inc. (PCYC)

Pharmacyclics, Inc. (PCYC) is rallying on sales guidance for Imbruvica

Digital Content Group
Jan 13, 2015 at 10:55 AM
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Pharmacyclics, Inc. (NASDAQ:PCYC) is up nearly 18% at $145.88, following an impressive 2015 sales forecast for its cancer treatment, Imbruvica. Also boosting shares of the drugmaker is a price-target hike to $130 from $118 at RBC, which also reiterated a "sector perform" rating. Meanwhile, PCYC's options pits are buzzing, with volume running at 20 times the intraday norm, and its 30-day at-the-money implied volatility 1.7% higher at 47.89% -- signaling elevated demand for short-term strikes.

Getting more specific, the security's most active option is the January 2015 150-strike call, where 721 contracts are on the tape. The majority appear to have been bought to open, as speculators gamble on an advance past the $150 half-century mark by this Friday's close, when front-month contracts expire.

Today's call buying bias is unusual, relative to recent months. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), PCYC's 50-day put/call volume ratio of 0.56 ranks higher than four-fifths of all readings taken in the last year. Similarly, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.82 ranks in the 83rd annual percentile.

Meanwhile, on the charts, Pharmacyclics, Inc.'s (NASDAQ:PCYC) intraday rally has brought the shares well above their year-over-year breakeven mark at $134.20. What's more, the stock is currently on pace to settle above $145 for the first time since late February. Accordingly, delta on the PCYC call has jumped to 0.33 (from zero at last night's close), signaling a 1-in-3 chance the option will be in the money at expiration.

Daily Chart of PCYC since February 2014

 

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