Put Volume Skyrockets as AstraZeneca plc (AZN) Slides

AstraZeneca plc (ADR) (AZN) options traders seem to be taking an unusual approach as the shares drop back below resistance

Jun 9, 2016 at 3:16 PM
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Drugmaker AstraZeneca plc (ADR) (NYSE:AZN) has shed 2.2% today to trade at $28.99, after the firm sold its non-U.S. anesthetics portfolio to Johannesburg-based Aspen Pharmacare Holdings Ltd. for an upfront payment of $520 million, plus other considerations. The deal doesn't seem to have options traders feeling terribly optimistic, either, as the stock's put options are on fire -- trading at 12 times their expected intraday rate.

Digging down, AZN has seen more than 2,600 puts change hands today, compared to the expected 210 -- landing put volume in the 99th percentile of its annual range. Moreover, puts are outpacing calls by a nearly 5-to-1 clip.

Most active today is the July 30 put, where it looks like traders may be selling to close the contracts, potentially collecting profits on their now in-the-money positions. Further contributing to the heavy put action today, a trader could be initiating a long put calendar spread at the June and weekly 6/24 29-strike puts.

In any case, today's preference for puts represents a substantial shift for AZN, as options traders have bought to open nearly nine calls for each put over the past two weeks on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The resulting call/put volume ratio of 8.88 sits higher than 94% of the past year's readings.

This heavily call-skewed action is echoed among short-term traders, as well. In fact, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.14 sits in the bottom percentile of its 12-month range, and shows calls outnumber puts by a more than 7-to-1 margin among options set to expire in the next three months.

Analysts seem to be taking a dimmer view of AZN, however. Of the five brokerage firms providing coverage, four maintain tepid "hold" ratings.

Technically, AZN hasn't had much to brag about lately. The shares are off almost 15% year-to-date, and hit a two-year low of $27.68 in March. With today's drop, AstraZeneca plc (ADR) (NYSE:AZN) also finds itself back below resistance at its 80-day moving average, which caused trouble for the shares in February and April.

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