Option Players Pounce On PTC Therapeutics, Inc. (PTCT)

PTC Therapeutics, Inc. (PTCT) is on fire, after the company said its drug still warrants a U.S. marketing application

by Alex Eppstein

Published on Oct 16, 2015 at 11:25 AM

PTC Therapeutics, Inc.'s (NASDAQ:PTCT) experimental muscle disorder drug failed to meet the primary goal of a late-stage trial, but the company said the results still support a U.S. marketing application. As such, the shares, which were down as much as 16% in overnight trading, were last seen up 2.7% at $32.62. Amid this volatility, traders are rushing PTCT's options pits.

Taking a step back, analysts have been quick to weigh in on the stock, following the disappointing data. Specifically, RBC, Oppenheimer, J.P. Morgan Securities, and Wedbush each slashed their price targets overnight. This is an unusual show of skepticism for an equity that sports "buy" ratings from 88% of covering analysts, and a consensus 12-month price target of $98 -- more than triple current levels.

As alluded to, option activity is blowing up this morning. Roughly 24,000 puts are on the tape, representing 20 times the expected amount for this point in the day. Digging deeper, eleventh-hour traders are eyeing the deep out-of-the-money October 25 put (which expires at tonight's close), while longer-term bettors have their sights set on the December 20 put -- the most active thus far. The 20-strike puts will move into the money if PTCT breaches $20 -- and hits record lows -- by options expiration on Friday, Dec. 18.

One group that can't be happy with PTC Therapeutics, Inc.'s (NASDAQ:PTCT) reversal higher is short sellers. A lofty 19% of the stock's float is sold short, representing six sessions' worth of activity, at typical volumes. This really shouldn't come as a surprise, though. Despite PTCT's intraday gain, it remains 36% lower on a year-to-date basis.

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