Pre-Earnings Traders Explore Options on MannKind Corporation (MNKD)

Call buyers and sellers are active on MannKind Corporation (NASDAQ:MNKD) today

by Karee Venema

Published on May 4, 2015 at 1:45 PM
Updated on May 4, 2015 at 1:49 PM

MannKind Corporation (NASDAQ:MNKD) is up 6.5% today at $4.45 -- paring its year-to-date deficit to 14.8% -- amid a broader rally in biotechs. In the equity's options pits, calls have the edge over puts by a nearly 5-to-1 ratio. Additionally, with the company slated to unveil its earnings report after Thursday's close, the equity's 30-day at-the-money implied volatility is up 3.8% at 83.6% -- signaling increased demand for MNKD's short-term contracts.

Drilling down, the security's weekly 5/8 4.50-strike and May 4.50 calls have seen the most action, and there appears to be a mix of buying- and selling-to-open activity occurring at both. Those initiating new long calls expect MNKD to rally north of the strike by the respective expiration dates, while those writing the calls are betting on $4.50 to serve as a short-term ceiling through expiration.

Buying and selling options has been popular in MNKD's options arena of late. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 5.67 calls for each put over the past 20 sessions. Meanwhile, for each put that they've bought in the last month, traders at the ISE, CBOE, and PHLX have sold to open 2.27.

As noted, MannKind Corporation (NASDAQ:MNKD) will report first-quarter earnings after the market closes on Thursday. Over the past eight quarters, the equity has averaged a single-session post-earnings move of 4.3%, and this time around, MNKD's near-term straddle is pricing in a loftier 8.8% swing.

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