Rallying MannKind Corporation (MNKD) Remains Plagued By Pessimism

MannKind Corporation (MNKD) is moving higher in spite of broad-market headwinds

by Andrea Kramer

Published on Jun 4, 2015 at 2:50 PM

While U.S. stocks -- and bonds -- are taking it on the chin in the wake of the latest Greek-debt developments, and ahead of a big economic day tomorrow, the shares of drugmaker MannKind Corporation (NASDAQ:MNKD) are up 6.6% at $5.90, in what some are attributing to a short squeeze. However, it looks like some options traders are rolling the dice on a short-term pullback. 

MNKD options are trading at 1.5 times the average intraday pace, with the now out-of-the-money August 5 put drawing the most attention. The International Securities Exchange (ISE) indicates that a healthy portion of the puts were bought to open at a volume-weighted average price (VWAP) of $0.98. As such, the buyers will make money if MNKD sinks beneath $4.02 (strike minus VWAP) by the close on Friday, Aug. 21, when the options expire.

Since touching a two-year low of $3.46 last month, the shares of MNKD have added nearly 71%. In fact, the stock is on pace to end the session atop its 200-day moving average for the first time since mid-February.

Nevertheless, bearish bets are par for the course for MNKD. On the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 10-day put/call volume ratio of 1.73 stands higher than 99% of all other readings from the past year. In other words, option buyers have picked up MNKD puts over calls at a near-annual-high clip during the past two weeks.

As such, the stock's Schaeffer's put/call open interest ratio (SOIR) rests at 0.99 -- in the 97th percentile of its annual range. In simpler terms, near-term option players have rarely been more put-biased during the past 12 months.

And, as alluded to earlier, a short squeeze isn't outside the realm of possibility. Short interest represents a whopping 41.9% of MannKind Corporation's (NASDAQ:MNKD) total available float -- representing nearly three weeks' worth of pent-up buying demand, at the equity's average daily trading volume.

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