Do These Vital Therapies Inc (VTL) Call Players Have an Ulterior Motive?

Vital Therapies Inc (VTL) is surging, and call volume has picked up in a big way

by Josh Selway

Published on Oct 13, 2015 at 3:33 PM
Updated on Jun 24, 2020 at 10:16 AM

After starting slow out of the gate, Vital Therapies Inc (NASDAQ:VTL) shot higher just before midday, and was last seen up 14.8% at $5.27. It's unclear what's driving this price action, but that's no concern to option traders. Call volume is running at five times the normal intraday pace, as traders bet on extended gains from the biotech stock. 

Digging deeper, it appears traders are buying to open the March 2016 5.50-strike call. By doing so, these speculators are anticipating a VTL surge above $5.50 -- a level it hasn't reached since its late-August bear gap -- by March 2016 expiration. It's interesting to note the stock topped out just below this level earlier, at its intraday peak of $5.47. 

It's entirely possible, though, that some of today's call buying is at the hands of short sellers hedging their bets. Almost 16% of VTL's float is sold short. At the equity's average pace of trading, this represents more than four days' worth of buying power. 

Longer term, Vital Therapies Inc (NASDAQ:VTL) remains nearly 80% lower in 2015, due mostly to the aforementioned bear gap. These struggles may help to explain the stock's elevated levels of short interest.

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