Red-Hot Heron Therapeutics, Inc. (HRTX) Keeps Rising, Bulls Want More

Heron Therapeutics Inc (NASDAQ:HRTX) has doubled in value in just four sessions

Jun 3, 2015 at 10:56 AM
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Biotech stock Heron Therapeutics Inc (NASDAQ:HRTX) has exploded during the past few sessions. In fact, the shares have more than doubled since last Thursday's close at $12.35, following a round of bullish brokerage notes and positive drug data. Things aren't slowing down, either, as the stock is up another 12.8% today at $26.17 -- and earlier hit a five-year high of $26.99 -- on news the company's chairman, Kevin Tang, bought over $3 million worth of shares. Activity has since picked up in HRTX's option pits, and the stock's 30-day at-the-money implied volatility has jumped 12.6% to 91.7%, indicating increased demand for short-term contracts.

By the numbers, while there have been fewer than 1,300 puts on the tape, over 10,000 calls have crossed -- seven times the expected intraday amount. Traders look to be buying to open the June 30 call, betting on HRTX to extend its run into multi-year-high territory, and topple $30 before the contracts expire at the close on Friday, June 19.

It's normal to see call buying in the equity's option pits. During the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 1.76 calls have been bought to open for each put.

This bullish bias is shared by the brokerage bunch, as all four firms covering the stock say it's a "strong buy." However, with its recent rise on the charts, HRTX is now nearing its average 12-month price target of $29.60, suggesting price-target hikes could be on the horizon.

Not everyone is a believer in Heron Therapeutics Inc (NASDAQ:HRTX), though. Short interest on the security rose over 25% during the most recent two-week reporting period. Now, the 1.3 million HRTX shares that are sold short would take almost an entire week to repurchase, at the stock's average daily volumes. As such, it's possible some of the recent call buying is a result of shorts hedging against any additional upside.


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