Puts Pick Up On Biotechs BioMarin Pharmaceutical Inc., Gilead Sciences, Inc.

Put options are popular on biotech stocks BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) and Gilead Sciences, Inc. (NASDAQ:GILD)

Jan 14, 2016 at 12:06 PM
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Biotech stocks BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) and Gilead Sciences, Inc. (NASDAQ:GILD) are seeing upticks in options trading today. Below, we'll take a closer look at what's happening with BMRN and GILD on the charts, and how speculators are positioning themselves. 

After earlier flirting with positive territory, BMRN is lower again, last seen down 1.8% at $82.64. The Street is responding to news the Food and Drug Administration (FDA) has rejected the company's New Drug Application (NDA) for its muscular dystrophy treatment, Kyndrisa. The stock has now dropped over 15% in the past 12 months, and is on the verge of closing below its 30-month moving average for the first time since August 2010. 

With the stock on the short-sale restricted list (SSR) after touching an annual low of $77.59, option volume has picked up. Put volume is running at four times the typical midday pace, while call volume is also accelerated -- and it appears traders are buying to open the February 85 call. These speculators are betting on the shares to reclaim the $85 mark before the back-month options expire. 

Put players are definitely more of what we're used to seeing in BMRN's options arena. According to data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 50-day put/call volume ratio of 1.77 is an annual high. In other words, puts have been bought to open over calls at a rapid-fire rate in recent months. 

Elsewhere, short interest is elevated on BioMarin Pharmaceutical Inc. (NASDAQ:BMRN). The stock's short-interest ratio stands at 6.10, meaning it'd take bears over six sessions to buy back their shorted shares, at BMRN's normal daily volumes. 

GILD has bounced back from its earlier losses, up 0.3% at $92.82. Longer term, though, the stock has lost almost 5% year-over-year, and option traders are split on where it heads from here.

Specifically, put volume is at 1.7 times the normal midday pace, thanks to heavy action at the January 2016 90 strike, which appears to be seeing buy- and sell-to-open activity, per ISE data. For those buying positions here, they're betting on GILD to sink below $90 before front-month options expire at the close tomorrow. For those selling the puts, they're expecting the $90 level to hold as a short-term floor through week's end.

While call buying has remained more popular in Gilead Sciences, Inc.'s (NASDAQ:GILD) options pits on an absolute basis, put buying has been picking up. The stock's 10-day put/call volume ratio at the ISE, CBOE, and PHLX has jumped from 0.22 to 0.61 since the start of the year. The current reading is higher than almost four-fifths of all others from the past year, meaning this level of put buying is uncommon. 

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