Arrowhead Pharmaceuticals Inc (ARWR) Call Buying Booms Ahead of Earnings

Arrowhead Pharmaceuticals Inc (ARWR) call options are trading at 48 times the expected intraday rate

Aug 9, 2016 at 12:33 PM
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Arrowhead Pharmaceuticals Inc (NASDAQ:ARWR) options are flying off the shelves ahead of the drugmaker's earnings report tonight. A stunning 11,500 call contracts are on the tape -- an annual high, and 48 times the usual intraday rate. From the looks of it, at least some of these bets are of the bullish sort.

The most active ARWR strike by a mile is the September 6 call, where nearly 10,400 contracts have crossed. International Securities Exchange (ISE) data confirms buy-to-open activity has taken place, suggesting traders are eyeing a move north of $6 by back-month expiration, at the close on Friday, Sept. 16. At last check, ARWR is 5.2% higher at $6.20.

Historically speaking, long calls have dominated puts across the major exchanges. For instance, the stock's 50-day call/put volume ratio at the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands at a brow-raising 25.86 -- with nearly 26 calls bought to open for every put. What's more, this ratio ranks in the 71st percentile of its annual range. Underscoring this call-skew, ARWR's Schaeffer's put/call open interest ratio (SOIR) of 0.28 stands in the low 14th percentile of its annual range.

Having said that, not every call buyer is necessarily upbeat toward the shares -- which, despite today's gains, are only modestly higher in 2016. Almost 18% of ARWR's float is sold short, and at the stock's typical trading volumes, it would take an incredible 32 sessions to cover these positions. Put simply, these shorts may have purchased calls to hedge their bets ahead of earnings.

Speaking of which, Arrowhead Pharmaceuticals Inc (NASDAQ:ARWR) will report earnings after the close, and the options market is pricing in a bold 12.3% post-event move for Wednesday's session. However, that's hardly the only fundamental development of note. Earlier, the drugmaker announced its $45 million private offering will be priced at $5.90 per share.

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