Shire PLC (SHPG) Option Bulls Bite Following J.P. Morgan Note

Shire PLC (ADR) (SHPG) options traders are gearing up for an extended upside run

by Alex Eppstein

Published on May 20, 2016 at 11:14 AM

Shire PLC (ADR) (NASDAQ:SHPG) call options are heating up along with the drugmaker's stock price. At last check, nearly 2,900 calls were on the tape -- tripling the expected intraday volume, and registering in the 99th annual percentile. According to Trade-Alert, option bulls are on the loose.

Looking more closely, the most active call option is the June 170 strike, with 1,000 contracts on the tape. It appears these in-the-money calls are being bought to open, meaning the traders foresee additional upside for SHPG through the close on Friday, June 17, when the soon-to-be front-month strike expires.

Stoking the stock's bullish flames is J.P. Morgan Securities, which added SHPG to its "Analyst Focus" list, and lifted its price target to 5,600P from 5,300P. At last check, the shares have jumped 3.2% to trade at $186.37. Since bottoming at an annual low of $147.60 in February, the drugmaker's stock has advanced a hefty 27%.

J.P. Morgan Securities is hardly the only brokerage firm in SHPG's bullish camp. In fact, 10 of 11 analysts consider the stock worthy of a "buy" rating, compared to a single "hold" and not one "sell" opinion. Plus, the average 12-month price target of $239.15 represents 28.3% upside to current trading levels, and territory not explored since last August.

On the other hand, one-tenth of Shire PLC's (ADR) (NASDAQ:SHPG) float is sold short. At the stock's average trading volume, it would take nearly 13 sessions to cover these bearish positions. In other words, SHPG could be ripe for a short-squeeze rally.

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