Sarepta Therapeutics Inc (SRPT) Option Bulls Bet On New Highs

Sarepta Therapeutics Inc (NASDAQ:SRPT) call options have been popular, but there may be an ulterior motive for these traders

by Josh Selway

Published on Dec 18, 2015 at 2:24 PM
Updated on Jun 24, 2020 at 10:16 AM

Call buyers have been piling into Sarepta Therapeutics Inc's (NASDAQ:SRPT) options pits recently. Looking at data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity boasts a 10-day call/put volume ratio of 15.16. This reading outranks 78% of all others from the past year, meaning there's been a greater-than-usual appetite for long calls over long puts recently. 

Echoing this preference for calls is SRPT's Schaeffer's put/call open interest ratio (SOIR). At 0.44, it shows that call open interest more than doubles put open interest, among options that expire within the next three months. 

This trend is continuing today. Call volume is accelerated, and the most popular option by a long shot is the May 50 call. It's likely traders are buying to open the deep out-of-the-money call, betting on SRPT to topple the half-century mark by May expiration -- for the first time since October 2013. 

Widening the sentiment scope, though, shows these call players may actually be short sellers looking for insurance. Short interest increased by over 12% during the past two reporting periods, and now accounts for more than one-fourth of SRPT's float. 

Elsewhere, analysts are mostly bullish on the drugmaker. Twelve brokerage firms are covering the stock, eight of which say it's a "buy" or better, with none calling it a "sell." Additionally, SRPT's consensus 12-month price target of $46.75 is located in two-year-high territory. 

The shares are enjoying a 161% lead in 2015, recently consolidating gains from a late-November bull gap. Today, traders are responding to news that rival drug company BioMarin Pharmaceutical Inc.'s (NASDAQ:BMRN) muscular dystrophy drug still hasn't been approved by the Food and Drug Administration (FDA). As a result, Sarepta Therapeutics Inc (NASDAQ:SRPT) has gained 5.6% to hit $37.82.

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