Novavax, Inc. (NVAX) Options Hot After Director Doubles Stake

Novavax, Inc. (NVAX) call options are flying off the shelves after a director bought 100,000 shares

Sep 22, 2016 at 3:39 PM
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Novavax, Inc. (NASDAQ:NVAX) is once again making headlines after director Gail Boudreaux purchased 100,000 NVAX shares on Tuesday, for $1.45 each. Boudreaux now owns 200,000 shares of NVAX stock, and her latest acquisition has been viewed as a much-needed vote of confidence in the biotech. Against this backdrop, NVAX options are flying off the shelves today.

NVAX had a rough go of it last week, plummeting nearly 85% to a seven-year low, after disappointing Phase 3 trial data for a respiratory vaccine. However, the biotech has managed to rebound 85% off of its low of $1.16, though it still sits well below its pre-bear gap prices. Today, NVAX is up 10.8% at $2.15, a 48% premium to what Boudreaux paid on Tuesday.

NVAX options are crossing the tape at  twice their usual intraday clip, with calls more than tripling puts, 30,000 to 9,735. Options volume is set to hit the 99th percentile of NVAX's annual range, with nine of the 10 most active options today being calls. However, given the relatively limited number of available put strikes on a stock currently trading just above $2, this bias may be a matter of necessity rather than an indicator of strong bullish appetites.

Among today's most active options is the October 2 put, but most of the action appears to be of the sell-to-open variety, indicating the traders are betting on a near-term floor at $2. Meanwhile, "vanilla" bulls are seemingly buying to open October 2.50 calls, to bet on extended short-term upside for NVAX. The most popular option so far, though, is the in-the-money January 2018 1-strike call, with more than 10,000 contracts exchanged.

Widening the scope, NVAX's 10-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits at 2.27, indicating almost 2.3 calls bought to open for every put option over the last 10 trading days. However, this could again be attributed to the relatively limited number of put options available for the stock, given its low price.

Nevertheless, Novavax, Inc.'s (NASDAQ:NVAX) call open interest was already at an annual peak, even before today's call activity, with the top open interest position being the October 8 call. While many of these positions were likely established before last week's bear gap -- when the stock was trading near the $8 level -- another possibility is short sellers hedging their bets. Currently, 24.2% of NVAX's shares are sold short, which would take 13.8 days of trading to cover, at NVAX's average daily volume.

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