Call Traders Blitz Medivation Inc (MDVN) After Sanofi Swipe

Medivation Inc's (NASDAQ:MDVN) board of directors unanimously rejected a $9.3 billion cash bid from Sanofi SA (ADR) (NYSE:SNY)

Apr 29, 2016 at 3:06 PM
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Following rumors that began circling earlier this month, Medivation Inc (NASDAQ:MDVN) has confirmed its board of directors unanimously rejected a hostile takeover attempt from French firm Sanofi SA (ADR) (NYSE:SNY), saying the $9.3 billion cash bid "substantially undervalues Medivation." SNY, meanwhile, said it is "committed to" combining the two companies, and plans to appeal directly to MDVN shareholders. Against this backdrop, MDVN stock is up 1.9% at $57.21, and call volume is docked in the 99th annual percentile.

By the numbers, 12,652 MDVN calls are on the tape -- three times what's typically seen at this point in the day, and nearly two times the number of puts that have traded. Most active is the equity's weekly 5/6 57.50-strike call, where the International Securities Exchange (ISE) confirms some new positions are being purchased.

By buying to open the near-the-money calls, traders expect MDVN stock to extend today's rally through next Friday's close, when the weekly series expires. This time frame includes the firm's first-quarter earnings report, which is set for release after next Thursday's close.

More broadly speaking, it's been put buyers who have been busy in MDVN's options pits in recent weeks. At the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 10-day put/call volume ratio of 0.74 sits just 10 percentage points from a 52-week peak.

Along similar lines, MDVN's Schaeffer's put/call open interest ratio (SOIR) of 0.91 rests in the 85th percentile of its annual range. In other words, short-term speculators are more put-heavy than usual toward the equity.

This skepticism isn't shared outside of the options pits, though. Short interest, for example, plunged 17.8% in the most recent reporting period to 3.52 million shares -- the lowest amount since January 2007. Meanwhile, 11 out of 15 analysts maintain a "strong buy" rating on MDVN, without a single "sell" to be found.

Technically, MDVN more than doubled since hitting a two-year low of $26.41 on Feb. 9. What's more, the shares of Medivation Inc (NASDAQ:MDVN) are set to notch their first monthly close north of their 20-month moving average since last July.

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