3 Biotechs Making Waves in the Options Arena

Biotech stocks Keryx Biopharmaceuticals (NASDAQ:KERX), Medivation Inc (NASDAQ:MDVN), and Opko Health Inc. (NYSE:OPK) are all seeing increased options activity today

by Josh Selway

Published on Mar 29, 2016 at 1:01 PM
Updated on Jun 24, 2020 at 10:16 AM

As we await an FDA announcement relating to one drugmaker, biotech stocks Keryx Biopharmaceuticals (NASDAQ:KERX)Medivation Inc (NASDAQ:MDVN), and Opko Health Inc. (NYSE:OPK) are making outsized moves today, and option traders are responding. More specifically, all three stocks are seeing elevated call volume. Let's take a closer look at how speculators are approaching KERX, MDVN, and OPK. 

KERX is up 15.7% at $5.23, after the company's kidney disease drug posted positive results in a late-stage study. The shares are now back in the black on a year-to-date basis, as they try to live up to analysts' expectations. Specifically, seven out of the nine brokerages that cover the shares say they're at least a "buy," while none call them a "sell." 

In the options pits, call volume is running at four times the expected intraday pace, topping put volume by a nearly 3-to-1 margin. The most popular option is the April 5 call, where it's possible traders are closing in-the-money positions amid the stock's pop. One option seeing buy-to-open activity, though, is the out-of-the-money May 6 call, with traders betting on Keryx Biopharmaceuticals (NASDAQ:KERX) topping $6 -- a level that acted as resistance toward the end of 2015 -- before the close on Friday, May 20, when the contracts expire. KERX hasn't closed above $6 since Sept. 2. 

MDVN, meanwhile, is down 7.9% at $38.00, after U.S. lawmakers called on the company to lower the price of its prostate cancer drug, Xtandi. Short sellers are probably wishing they would have stuck around for this price action. Short interest on MDVN fell by roughly 12% over the past two reporting periods. Today, the stock is short-sale restricted.

While call volume is running at four times the typical intraday rate -- which only highlights the prevailing call bias -- it looks like some traders may be betting against the stock by possibly selling to open the April 50 call. If true, these speculators are wagering that Medivation Inc (NASDAQ:MDVN) will hold below the half-century mark through front-month options expiration at the close on Friday, April 15. 

Finally, OPK has dropped 2.4% to trade at $10.88, after falling 7.9% out of the gate. Traders may be jockeying for position ahead of the Food and Drug Administration's (FDA) decision on the company's drug application for Rayaldee, a treatment for hyperparathyroidism. The FDA is expected to make a decision on the application today. 

Opko Health Inc.'s (NYSE:OPK) calls are trading at 1.5 times the average intraday pace this afternoon, and the April 11 strike is leading the way. It appears traders are buying to open the strike, hoping for OPK to climb back above $11 within the next few weeks. 

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