ACADIA Pharmaceuticals Inc. (ACAD) Traders Play the Dip

ACADIA Pharmaceuticals Inc. (ACAD) is giving back some of yesterday's huge gains

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Published on Mar 11, 2015 at 10:32 AM
Updated on Apr 20, 2015 at 5:32 PM

This morning, ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) is pulling back from yesterday's surge to record levels -- a move that was sparked by takeover speculation. At last check, the shares were down 5.6% at $43.31. However, options traders are keeping the faith, as intraday call volume has spiked to 14 times the norm.

In the wake of an about-face on the charts, the stock's 30-day at-the-money implied volatility surged to an annual high of 89.1% before pulling back. Looking more closely, the March 48 call is seeing more attention than any other ACAD strike, with nearly 3,500 contracts on the tape. Data suggests these positions are being bought to open, in the hopes the underlying will topple $48 -- and reach uncharted territory -- by next Friday's close, when the front-month options expire. Amid today's swoon, delta on the out-of-the-money call has dropped to 0.31 from 0.45 at Tuesday's close, indicating a less than 1-in-3 chance the option will expire in the money.

This morning's preference for calls over puts is more of the same for ACAD. During the last 10 weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock has racked up a call/put volume ratio of 7.15 -- in the 90th percentile of its annual range.

Similarly, the brokerage bunch is extremely bullish toward ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD). Of the eight analysts tracking the shares, seven have doled out a "strong buy" rating, with one "hold" and not a single "sell."


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