Isis Pharmaceuticals, Inc. (ISIS) Traders Wager on Record Highs

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

Mar 19, 2015 at 2:41 PM
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There are a handful of biotechs making waves today, and ISIS Pharmaceuticals, Inc. (NASDAQ:ISIS) is no exception. The stock is up 7.6% at $77.32 -- after earlier hitting a record peak of $77.33 -- but options traders think there's more upside on the horizon.

Taking a quick step back, calls are crossing the tape at four times the average intraday pace. The equity's April 75 call has seen the most action, and according to Trade-Alert, it appears new positions are being purchased for a volume-weighted average price (VWAP) of $4.34.

Based on this average entry price, at-expiration breakeven for today's call buyers is $79.34 (strike plus VWAP), or territory yet to be charted. Should the stock settle south of the strike at the close on Friday, April 17 -- when back-month options expire -- the most the speculators stand to lose is the initial premium paid.

Today's quicker-than-usual call volume highlights the growing trend seen in the security's options pits of late. Over the past two weeks, the stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio has jumped to 6.36 from 2.42, and currently ranks in the 66th percentile of its annual range.

This bullish positioning among option traders shouldn't be too surprising, considering ISIS has rallied nearly 64% over the past 52 weeks. However, it's a stance not shared outside of the options pits.

Short interest, for example, accounts for 13.7% of the stock's float. In light of this, it's possible a portion of the recent call buying is the result of shorts hedging against any additional upside. Additionally, should any of these short sellers capitulate to ISIS Pharmaceuticals, Inc.'s (NASDAQ:ISIS) uptrend, the stock could be ripe for a short squeeze. At the equity's average daily pace of trading, it would take more than a week to cover all these shorted shares.

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