Option Bulls Flock to Galena Biopharma Inc (GALE) After FDA Nod

The Food and Drug Administration (FDA) granted Galena Biopharma Inc's (GALE) breast cancer treatment, NeuVax, with fast track development status

Jun 1, 2016 at 11:13 AM
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Galena Biopharma Inc (NASDAQ:GALE) is on a tear, up 20.4% to $2.18. The rally comes after the U.S. Food and Drug Administration (FDA) granted fast track development status to the company's experimental breast cancer treatment, NeuVax. The jump on the charts brings GALE's year-to-date gain to 48%, and has the shares facing off with their 160-week moving average -- a trendline not conquered on a weekly basis since September 2014.

GALE Weekly Chart June 1

Analysts have been firmly in GALE's corner of late, with all five providing coverage rating the stock a "buy" or better. Moreover, the average 12-month price target of $4.00 sits at a 93% premium to current levels, and a region not seen in more than two years. Elsewhere, short sellers have been backing off, with these bearish bets falling by 6.4% during the last two reporting periods. Still, nearly 12% of the equity's total float is sold short, equating to roughly 18 days' worth of trading, at GALE's typical pace.

Options traders have been extremely call heavy of late. In fact, over the last two weeks of trading on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 26,428 calls, compared to fewer than 450 puts.

The bulk of the activity has centered at GALE's January 2017 2.50-strike call, where 15,281 contracts have been added in the past two weeks. It looks like the majority of the action was of the buy-to-open kind, as speculators bet on a breakout north of $2.50 by January options expiration.

Today, GALE's call options are in high demand once again, changing hands at 17 times their average daily pace -- with call volume docked in the 100th annual percentile.The January 2017 and 2018 series are hot, accounting for the top four of GALE's 10 most active options. Shorter-term traders are also targeting the $2.50 level, and appear to be buying to open the stock's July 2.50 call. Buyers of this call are looking for Galena Biopharma Inc (NASDAQ:GALE) to extend its rally through the close on Friday, July 15, when back-month options expire.

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