M&A Buzz Sets Medivation Inc (MDVN) Options Pits on Fire

Options action is heating up on Medivation Inc (MDVN), amid reports of a rebuffed buyout bid

Apr 13, 2016 at 11:18 AM
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Biotech stock Medivation Inc (NASDAQ:MDVN) is up 7.4% at $49.12 today, bringing the shares into the black on a year-to-date basis for the first time in 2016, on reports that the company has rebuffed a takeover bid from French drugmaker Sanofi SA (ADR) (NYSE:SNY). MDVN has recently been working to defend itself against such approaches, as the company recently reiterated that it doesn't plan to sell itself, but according to Bloomberg, SNY may still be considering a hostile bid. MDVN shareholders are excited, and in the options pits, the action is already heating up.

MDVN options are changing hands at five times their typical intraday pace, and calls outnumber puts nearly 10-to-1, with more than 6,700 traded so far. In fact, call volume is on pace to hit an annual high.

Of the 10 most active options today, nine are calls, with the majority belonging to the April series, which expires this Friday. It looks like some traders may be buying to open the April 50 call -- the most active option thus far -- betting that MDVN will rally above the round-number $50 level by the end of the week, when front-month options expire.

Today's preference for calls is just an extension of what MDVN has seen lately. The stock has a Schaeffer's put/call open interest ratio (SOIR) of 0.40 -- meaning calls more than double puts among options expiring in three months or less. What's more, this ratio ranks lower than 99% of all readings in the past year, and total MDVN call open interest is already at an annual high.

Technically, MDVN has put on an impressive performance in recent months, nearly doubling in value since hitting a two-year low of $26.41 in early February. And on its recent journey north, the equity has been enjoying support from its 30-day and 200-day moving averages. It look as though analysts are expecting more upside, too -- of the 14 brokerage firms providing coverage, 10 call Medivation Inc (NASDAQ:MDVN) a "strong buy," without a "sell" rating in sight.

MDVN Daily Chart

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