Option Bear Bets On More Bad Days for Celgene Corporation (CELG)

Celgene Corporation's (NASDAQ:CELG) weekly 5/8 107-strike put is being bought to open today

Apr 30, 2015 at 2:12 PM
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Drugmakers are having a rough day -- as echoed in the price action of Agios Pharmaceuticals Inc (NASDAQ:AGIO) and Inovio Pharmaceuticals Inc (NASDAQ:INO) -- and Celgene Corporation (NASDAQ:CELG) is no exception. The stock is down 3.9% at $108.84, after the company reported first-quarter sales below analysts' estimate, and one option bear thinks there's more room to fall.

Taking a quick step back, puts are trading at two times the average intraday pace this afternoon, with 19,000 contracts on the tape thus far. One notable trade is a multi-exchange sweep of 1,000 weekly 5/8 107-strike puts that was bought to open for $208,000 (number of contracts * $2.08 premium paid * 100 shares per contract). This is the most the speculator stands to lose, should CELG maintain its foothold atop $107 through next Friday's close, when the series expires. Profit, meanwhile, will accumulate on a move south of the at-expiration breakeven mark of $104.92 (strike less premium paid).

Widening the sentiment scope reveals option traders were stocking up on long calls in the weeks leading up to this morning's scheduled event. Specifically, the equity's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 2.97 rests higher than 85% of all similar readings taken in the past year.

The withstanding optimism in the options pits is pretty understandable, given CELG's long-term technical tenacity. Over the past 52 weeks, the stock has tacked on 47% -- and topped out at a record high of $129.06 as recently as March 20. What's more, the security has historically been a strong second-quarter performer. Meanwhile, despite today's earnings-induced drop, Celgene Corporation (NASDAQ:CELG) found a foothold atop its 180-day moving average -- a trendline that served as resistance in mid-2014, but appears to have switched to a more supportive role.




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