Call Options Catch Fire as Array Biopharma Inc (ARRY) Soars

Array Biopharma Inc (ARRY) tapped a new annual high on upbeat data from a trial of its melanoma treatment

Sep 26, 2016 at 11:15 AM
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Biotech stock Array Biopharma Inc (NASDAQ:ARRY) is the top performer on the Nasdaq this morning, adding 53.7% to $5.61 -- and fresh off a new annual high of $5.88 -- after the firm reported a Phase 3 trial of its melanoma treatment met its primary endpoint. The pop puts ARRY up nearly 33% year-to-date. In fact, the stock is on track to finish the day in positive year-to-date territory for just the fourth time in 2016. As a result, ARRY's generally quiet options pits are on fire, with both call and total options volume on pace for new 12-month highs.

Jumping right in, ARRY call options are changing hands at a whopping 20 times the expected intraday rate, outnumbering put options by a more than 4-to-1 margin. Dominating the action are the October 4 and 5 calls, both of which may be seeing sell-to-close activity, as bullish speculators collect profits on their winning positions.

Today's options action represents a significant change of pace for ARRY, where puts have been the options of choice in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio stands at an elevated 1.26 -- in the 88th annual percentile. And near-term traders, in particular, have been more put-skewed than usual. ARRY has a Schaeffer's put/call open interest ratio (SOIR) of 0.96 -- higher than 90% of all readings in the last 52 weeks.

Bearish sentiment is prevalent among traders outside of the options pits, too. Specifically, short interest on ARRY currently represents 14.7% of the stock's total float. At the equity's average pace of trading, it would take more than seven sessions to cover all these pessimistic positions.

On the other hand, the brokerage bunch has taken a contrasting approach. All seven analysts tracking Array Biopharma Inc (NASDAQ:ARRY) maintain a "strong buy" rating on the stock. Plus, the average 12-month price target of $8.50 sits at a 51.5% premium to ARRY's current levels, and in a region the shares haven't seen on a daily closing basis in roughly eight years.

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