Eleventh-Hour Bulls Mob MannKind Corporation (MNKD)

Traders are targeting MannKind Corporation's (MNKD) soon-to-expire May 4 call

May 15, 2015 at 1:40 PM
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MannKind Corporation (NASDAQ:MNKD) is up more than 11% this afternoon on unconfirmed buyout speculation, and calls are running hot. Specifically, 23,000 calls are on the tape, nearly tripling the expected intraday amount.

Looking more closely, buy-to-open activity may be transpiring at the at-the-money May 4 call. In so doing, these eleventh-hour bulls anticipate MNKD will extend its lead north of the strike by tonight's close, when the front-month options expire. Based on the volume-weighted average price (VWAP) of $0.05, breakeven is $4.05 (strike plus VWAP), which is exactly where the stock was trading at last check. 

Today's penchant for call buying has long been the trend in MNKD's options pits. During the past 10 weeks across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity has accumulated a call/put volume ratio of 3.94, with nearly four calls bought to open for every put. What's more, the ratio outranks 90% of comparable readings from the past year.

However, it's possible some of these long calls -- especially at out-of-the-money strikes -- were at the hands of short sellers seeking an upside hedge. After all, 38.6% of MNKD's float is sold short, representing four weeks' worth of trading, at the stock's typical trading levels.

In spite of MannKind Corporation's (NASDAQ:MNKD) sharp intraday gains, the security remains a long-term laggard. Since its most recent high of $7.88 on Feb. 10, MNKD has surrendered nearly half of its value.

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