Intercept Pharmaceuticals, Inc. (ICPT) Takes Out $300; Option Traders React

Intercept Pharmaceuticals Inc (ICPT) calls are flying off the shelves as the stock trades north of $300

by Andrea Kramer

Published on May 14, 2015 at 2:35 PM

Like the broader equities market and many of its biotech peers -- Puma Biotechnology Inc (NYSE:PBYI) excluded -- Intercept Pharmaceuticals Inc (NASDAQ:ICPT)  is in rally mode. The shares are up 3.1% at $307.92, and are on pace to end atop $300 for the first time since August. What's more, option traders are rolling the dice on even more short-term upside for ICPT, judging by today's call activity.

ICPT calls are crossing at twice the average afternoon pace, with more than 2,000 contracts exchanged so far. It looks like speculators are buying to open the June 340 call, which will move into the money if ICPT topples the strike by the close on Friday, June 19, when the soon-to-be front-month options expire.

However, some of those out-of-the-money call purchases could be attributable to short sellers looking for a hedge. Short interest accounts for 16% of ICPT's total available float, and would take about a week to buy back, at the stock's average pace of trading.

Whatever the motive, now is an opportune time to purchase short-term bets on ICPT. The equity's 30-day at-the-money implied volatility is sitting at a 52-week low of 51.6%, and the stock's Schaeffer's Volatility Index (SVI) of 56% stands higher than just 17% of all other readings from the past year. In other words, ICPT's near-term option premiums are historically deflated right now.

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