Short-Term Option Bulls Swarm Ionis Pharmaceuticals Inc (IONS)

Ionis Pharmaceuticals Inc (IONS) is sharply higher on a favorable patent ruling

Mar 23, 2016 at 10:41 AM
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Ionis Pharmaceuticals Inc (NASDAQ:IONS) is up 2.2% at $42.65, after winning a patent dispute against fellow drugmaker Gilead Sciences, Inc. (NASDAQ:GILD). The sharp upside move has IONS' options pits running at a rapid-fire rate, with intraday call volume crossing at quadruple the norm -- though still low on an absolute basis, with just 1,126 contracts on the tape.

Seeing heavy attention is the weekly 3/24 45-strike call. From the looks of it, these out-of-the-money contracts are being bought to open, as options traders wager on IONS to topple $45 by tomorrow's close, when the weekly series expires. Thanks to today's rally, delta on the call has jumped to 0.22 from zero, indicating a slightly better than 1-in-5 chance the option will be in the money at expiration. If, however, the call expires out of the money, the most the buyers will sacrifice is the initial premium paid.

Taking a step back, long calls have been popular on IONS in recent weeks. During the past 10 sessions at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open about 10 calls for every put. The resultant call/put volume ratio of 10.02 rests just 5 percentage points from an annual high.

Elsewhere on the sentiment front, short sellers have been turning tail. During the latest reporting period, short interest on IONS fell over 14%. However, 8.5% of the stock's float remains dedicated to short interest, representing more than a week's worth of pent-up buying power, at IONS' typical trading volume.

On the charts, the shares have been pushing higher since touching an annual low of $30.93 on Feb. 11. Specifically, Ionis Pharmaceuticals Inc (NASDAQ:IONS) has gained close to 38% in just over one month, though its descending 80-day moving average looms overhead as potential resistance.

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