Are Clovis Oncology, Inc. (CLVS) Shorts Feeling the Heat?

Clovis Oncology Inc (CLVS) option traders are optimistic after an FDA nod

by Andrea Kramer

Published on Apr 7, 2015 at 10:56 AM
Updated on Jun 24, 2020 at 10:16 AM

Thanks to a regulatory nod, Clovis Oncology Inc (NASDAQ:CLVS) shot higher out of the gate, and was last seen flirting with a gain of 9% at $74.84. The stock is now up more than 33% in 2015, and while option traders are rolling the dice on even more short-term upside, short sellers may be shaking in their boots.

CLVS calls are trading at 11 times the average intraday clip, and have nearly doubled puts thus far. It looks like speculators are buying to open the April 75 call, amid hopes for the shares to extend their journey to well north of $75 by options expiration on Friday, April 17. In light of the equity's surge, delta on the call more than doubled overnight, to 0.49 from 0.21, implying a roughly 1-in-2 shot of the contract expiring in the money.

Today's appetite for bullish bets marks a shift in sentiment among CLVS' options crowd. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 50-day put/call volume ratio sits at an annual high of 1.39. In other words, option buyers have bought to open CLVS puts over calls at a much faster-than-usual pace during the past 10 weeks.

As alluded to earlier, CLVS shorts might be feeling the heat today. Short interest accounts for nearly 24% of the stock's total available float. In fact, it would take almost 12 sessions to repurchase these pessimistic positions, at the stock's average daily trading volume -- ample fuel for a short squeeze to propel CLVS even higher.

Thanks to today's rally -- fueled by a fresh "breakthrough" status for its ovarian cancer therapy by the Food and Drug Administration -- CLVS is poised to end atop its 10-day moving average for the first time since March 19, when the stock was two days off an annual high of $83.46. Elsewhere in the biotech world, this pair of drugmakers is on the rise in the wake of upbeat analyst attention, while dismal data is obliterating Ocular Therapeutix Inc (NASDAQ:OCUL).


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