Diplomat Pharmacy Reversal Has Options Traders Circling

Diplomat Pharmacy Inc (DPLO) hit an all-time peak earlier

by Karee Venema

Published on Mar 26, 2015 at 1:44 PM
Updated on Jun 24, 2020 at 12:54 PM

Diplomat Pharmacy Inc (NYSE:DPLO) was down in electronic trading, after the firm priced its follow-on stock offering at $29 per share -- a discount to last night's close. However, the equity quickly reversed course, and was last seen up 14% at $34.54, hitting a record high of $34.90 along the way. This volatile price action has sparked a rush of activity in the equity's options pits, with contracts crossing the tape at 11 times the average intraday rate.

Calls have emerged as the options of choice, and are outpacing puts by a roughly 2-to-1 margin. Traders have set their sights on another all-time peak -- with buy-to-open activity possibly occurring at DPLO's April and August 35 calls. For those purchasing new positions, the goal is for the security to rally above the strike by the respective expiration dates.

From a wider perspective, sentiment is generally optimistic toward a stock that's more than doubled since going public on Oct. 10. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for example, speculators have bought to open 2.21 calls for every put over the past two weeks.

Elsewhere, four of six covering analysts maintain a "strong buy" rating on the equity, versus two "holds." However, Diplomat Pharmacy Inc's (NYSE:DPLO) average 12-month price target of $33.67 sits below current trading levels, meaning there's room for a round of price-target hikes, should the shares maintain their upward trajectory.


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