Skeptics Bank on a WuXi PharmaTech (Cayman) Inc. (WX) Pullback

WuXi PharmaTech (Cayman) Inc.'s (ADR) (NYSE:WX) December 45 put is being bought to open

Apr 30, 2015 at 11:05 AM
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WuXi PharmaTech (Cayman) Inc. (ADR) (NYSE:WX) is fresh off a seven-year high of $45 -- and was last seen 11.4% higher at $44 -- after the R&D firm announced it has received an offer to go private. Not surprisingly, intraday options volume has exploded to 23 times the norm.

Receiving notable attention is WX's December 45 put, and all indications point to buy-to-open activity. In short, these traders expect the shares will reverse lower by December options expiration. The volume-weighted average price (VWAP) on the in-the-money puts is $2.12, yielding a breakeven mark of $42.88 (strike less VWAP).

In recent months, calls have been the options of choice on WX. The stock's 50-day call/put volume ratio across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is 7.22, which ranks higher than 93% of comparable readings from the past year.

As alluded to, WuXi PharmaTech Inc. (NYSE:WX) has been strong on the charts. Taking into account today's massive gains, the equity is staring at a year-to-date lead of roughly 31%, and is exploring territory not charted since October 2007.
 

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