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Clovis Oncology Inc (CLVS) Call Volume Surges as Stock Slides

Clovis Oncology Inc (CLVS) is plummeting after disappointing results for a midstage drug trial

Oct 7, 2016 at 2:33 PM
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Biotech firm Clovis Oncology Inc (NASDAQ:CLVS) is sinking on the results of a mid-stage study for its ovarian cancer treatment, which showed 100% of patients experienced a treatment-related adverse event. What's more, nine of the trial's patients died, but the causes were deemed unrelated to the treatment. CLVS shares are down 15.9% at $30.09 on the news, landing the stock squarely on the short-sale restricted list. Meanwhile, the equity's typically quiet options pits are heating up as speculators rush to weigh in.

At last check, CLVS puts were changing hands at a 13 times the usual volume for this point in the day, though calls still lead on an absolute basis. In fact, put volume has already tapped a new annual high, and total options volume is on pace to do the same, with call volume running in the 99th annual percentile.

The October series is dominating the action, accounting for eight of the 10 most popular strikes. Leading the way are the October 35 and 30 calls, and if traders are opening long positions at these strikes, they are looking for CLVS shares to bounce back before the front-month series expires, on Friday Oct. 21.

From a broader perspective, a call-heavy approach is nothing new in CLVS' options pits. Over the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have purchased more than two calls for each put. And yet, the resulting call/put volume ratio ranks near the bottom third of all readings in the past year. Echoing this, CLVS' Schaeffer's put/call open interest ratio (SOIR) of 0.60 is in the 67th percentile of its 12-month range -- indicating near-term options traders have also been less call-heavy than usual toward the stock.

Of course, a preference for long calls is not so surprising, considering over 60% of CLVS' total float is wrapped up in short interest -- a record high. It's possible short sellers have been picking up protective calls as a hedge against unexpected upside moves.

Technically, CLVS hasn’t been much to write home about this year. Heading into today's session, the shares were barely in positive year-to-date territory after a recent rally was stopped short at the $40 level. On the plus side, Clovis Oncology Inc (NASDAQ:CLVS) has pared some of its earlier losses, as its rising 50-day moving average -- which has acted as support and resistance in the past -- limited this morning's slide.

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