Options Hot as Anavex Life Sciences Corp. (AVXL) Gaps Lower

Anavex Life Sciences Corp. (NASDAQ:AVXL) has plunged nearly 31% this afternoon

Jul 27, 2016 at 3:13 PM
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After spending most of the day hovering near breakeven, Anavex Life Sciences Corp. (NASDAQ:AVXL) began selling off sharply around 1:00 p.m. ET, as traders panned the biotech's mid-stage trial update for its Alzheimer’s treatment. While the stock was halted a number of times, it has since resumed trading -- last seen down 30.8% at $5.18, and on the short-sale restricted list. Options traders, meanwhile, are blitzing AVXL stock -- with both call and put volume hitting 52-week peaks.

Diving deeper, around 8,700 call options have changed hands so far, compared to 1,740 put options. Most active on the call side is the August 7.50 strike, where it looks like new positions are being purchased. Put players, meanwhile, appear to be buying to open AVXL's August 5 strike. If this is indeed the case, call buyers expect the equity to be sitting north of $7.50 at the close on Friday, Aug. 19 -- when front-month options expire -- while put buyers are betting on the stock settling south of $5.

Widening the sentiment scope reveals call buyers have recently had the upper hand in AVXL's lightly traded options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for instance, speculative players have bought to open 3,004 calls in the past 10 sessions, compared to 330 puts. Specifically, the stock's August 7.50 call has seen the biggest rise in open interest over this time frame, with 2,369 contracts added.

Considering AVXL closed just one penny shy of this strike yesterday, some of the activity over the past two weeks at the August 7.50 call may have been at the hands of "vanilla" option bulls. However, given today's bear gap -- which has sent Anavex Life Sciences Corp. (NASDAQ:AVXL) into the red on a year-to-date basis -- it's possible some of today's action at this now out-of-the-money strike is a result of short sellers hedging against a quick bounce. Nearly 13% of AVXL's float is sold short.


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