Drug Data Drives Gains, Put Volume on Exelixis, Inc. (EXEL)

A drug data-induced rally for Exelixis, Inc. (EXEL) has brought out a rare batch of put players

Oct 10, 2016 at 10:28 AM
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Biotech stock Exelixis, Inc. (NASDAQ:EXEL) is starting the week on a strong note, up 4% at $13.47 after results in a Phase 2 trial showed the firm's kidney cancer drug, Cabometyx, outperformed a competing treatment by Pfizer Inc. (NYSE:PFE). EXEL has been a beast on the charts this year, adding 139% so far in 2016. The shares hit a 14-year high of $15.58 in late September, before pulling back to their 40-day moving average. And today, the stock's options are flying off the shelves as traders bet against a sharp reversal.

At last check, EXEL puts were changing hands at 21 times the typical rate for this point in the day, with more than 6,300 contracts on the tape -- landing put and total options volume in the 100th percentile of their respective annual ranges. Notably, open interest on the stock's options is already docked at a 12-month high.

Topping the action so far is the October 13 put. It appears most of the activity results from one trader selling to open a sweep of almost 4,100 contracts. By selling to open the puts, the speculator is betting EXEL can maintain its position above the $13 level through front-month expiration, at the close on Friday, Oct. 21. It's worth noting that this transaction may be related to a simultanous trade involving 1,767 October 14 puts, which transpired at the bid price -- though, it's unclear whether the sweep is being opened or closed.

In absolute terms, today's action marks a change of pace, as a preference for long calls has been the norm in EXEL's options pits for quite some time. But options traders have actually been less bullish than usual in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock has seen 7.26 calls bought to open for each put over the past 10 days. However, the resulting call/put volume ratio sits near the bottom quartile of all readings taken in the past year.

Near-term options traders, meanwhile, have been even more call-heavy than normal. EXEL's Schaeffer's put/call open interest ratio (SOIR) of 0.30 -- showing calls more than triple puts among options set to expire in three months or less -- ranks lower than 92% of the past year's readings.

Elsewhere, short interest on the equity remains elevated, representing 10.5% of EXEL's total float, or nearly a week's worth of trading, at the stock's typical daily pace. Still, these bearish positions have fallen sharply since hitting a record high one year ago. Analysts, meanwhile, are largely in Exelixis, Inc.'s (NASDAQ:EXEL) bullish corner, with four out of five rating the stock a "strong buy," and not a single "sell" on the books.

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