Anavex Life Sciences Corp. (AVXL) Rally Sends Stock, Options Volumes Toward Highs

Biotech issue Anavex Life Sciences Corp. (AVXL) is soaring after the firm signed a new agreement with Biogen Inc (BIIB)

Sep 28, 2016 at 12:00 PM
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Biotech stock Anavex Life Sciences Corp. (NASDAQ:AVXL) is enjoying another day in the sun, up 42% at $4.46 after the firm inked an agreement with Biogen Inc (NASDAQ:BIIB). Under the agreement, BIIB will test AVXL's key multiple sclerosis treatment ANAVEX 2-73. With the stock on track for its best session in months, its typically quiet options pits have caught fire.

Taking a quick step back, despite today's upside gap and some other big moves of late, AVXL is still sitting on a roughly 20% year-to-date loss. It's also going head-to-head with its 200-day moving average, which contained the stock's upward movements in the early part of the year after serving as support in late 2015. Meanwhile, AVXL's stock volume is on track for a new 12-month high.

Now turning to the options pits, intraday volume here is also on pace to tap an annual high, with roughly 6,300 contracts on the tape so far, compared to an expected daily volume of 348 contracts. Amid this accelerated activity, the stock's 30-day at-the-money implied volatility has popped to 158.2% -- in the 92nd percentile of its 12-month range.

Calls are crossing at a whopping 51 times their average intraday pace, and currently account for eight of AVXL's 10 most active options. Most popular is the October 5 call, where it appears possible traders are purchasing new positions to bet on more short-term upside. This wouldn’t be unusual, considering the call holds the highest open interest of any AVXL option, with considerable buy-to-open activity confirmed by data from the major exchanges.

More generally, call buying has been popular in AVXL's options pits for weeks. Across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 4.58 calls for every put in the past 10 sessions.

That doesn't mean all these traders are bulls, however. Short interest on AVXL rose by 8.1% during the most recent two-week reporting period, and now accounts for nearly 12% of the stock's total float. At Anavex Life Sciences Corp.'s (NASDAQ:AVXL) typical daily pace of trading, it would take seven sessions to cover all these bearish positions -- suggesting recent buyers of out-of-the-money calls may well be short sellers looking to hedge against an upside surprises, such as today's.

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