Banner Day Brings Out PTC Therapeutics, Inc. (PTCT) Option Bulls

PTC Therapeutics, Inc. (PTCT) is blowing up on an overseas drug recommendation

by Alex Eppstein

Published on Apr 15, 2016 at 2:07 PM
Updated on Jun 24, 2020 at 10:16 AM

Biotech stocks are on the move today, and none more so than PTC Therapeutics, Inc. (NASDAQ:PTCT). After being halted earlier due to volatility, the stock has resumed trading and surged over 47% to hover near $9.17 -- its best one-day percentage gain in almost two years -- on a drug recommendation from the U.K.'s National Institute of Health and Care Excellence. What's more, the massive gains have options traders coming out in droves.

Looking more closely, 11,000 PTCT options are on the tape, or 25 times the expected intraday amount. Calls are outstripping puts by a nearly 4-to-1 count, and buy-to-open activity is detected at the April 7 and 9 calls. By purchasing these positions, eleventh-hour bulls foresee PTCT extending its run higher through tonight's closing bell, when front-month options expire.

Call buying has been the trend in recent months at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), amid a relatively low-volume backdrop. PTCT's 50-day call/put volume ratio across those exchanges is 4.60 -- just 9 percentage points shy of a 12-month peak. Echoing this call bias, PTCT's Schaeffer's put/call open interest ratio (SOIR) of 0.18 sits in the low 3rd percentile of its annual range.

While option bulls are dancing in the streets. short sellers may be feeling the heat. Nearly 24% of PTCT's float is sold short, representing more than six sessions' worth of trading activity, based on the stock's average volumes. If, however, these short sellers hedged their positions using protective calls, their losses may be limited.

As alluded to, PTC Therapeutics, Inc. (NASDAQ:PTCT) is having a banner day on the charts. From a long-term perspective, though, the biotech stock has a ways to go before climbing back to respectability. Year-to-date, the shares have surrendered nearly three-quarters of their value.

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