MEI Pharma, Inc. (MEIP) Option Bulls Jump In as Stock Plunges

MEI Pharma Inc (MEIP) calls are hot, despite the drugmaker's significant plunge

by Andrea Kramer

Published on Mar 23, 2015 at 11:13 AM
Updated on Apr 20, 2015 at 5:32 PM

MEI Pharma Inc (NASDAQ:MEIP) is getting demolished this morning, after the firm unveiled disappointing data on its cancer drug. The stock -- now relegated to the short-sale restricted list -- has lost more than two-thirds of its value to trade at $1.99, and earlier touched a six-year low of $1.87. Nevertheless, it looks like option traders aren't giving up on MEIP.

Overall options volume is running at four times the average intraday clip, though calls have outnumbered puts so far. Digging deeper, possible buy-to-open activity has been detected at the April 2.50, 5, and 7.50 calls, with the buyers expecting MEIP to muscle back atop the respective strikes by the close on Friday, April 17, when the newly front-month contracts expire.

Prior to today, MEIP was making strides on the charts, and had outpaced the broader S&P 500 Index (SPX) by 66 percentage points over the past two months. Nevertheless, short-term puts were more popular than usual, as the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.86 stands higher than 82% of all other readings from the past year. In the same skeptical vein, short interest jumped 30% during the last reporting period (but still represents a scant 4.3% of MEIP's total float).

Analysts, on the other hand, were decidedly bullish on MEI Pharma Inc (NASDAQ:MEIP). In fact, all eight covering brokerage firms harbored "strong buy" opinions. Today, however, Roth Capital slapped MEIP with a downgrade to "neutral" from "buy," and took an axe to its price target, revising it to $2.50 from $14.


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