Hard-Hit Horizon Pharma PLC (HZNP) Mobbed by Bearish Options Bettors

Horizon Pharma PLC (HZNP) is reeling this morning on downbeat sales guidance

Alex Eppstein
Oct 11, 2016 at 10:44 AM
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Similar to this genetic analysis stock, Horizon Pharma PLC (NASDAQ:HZNP) is tanking on woeful sales guidance. At last check, the drugmaker's shares had sunk 5.5% to trade at $18.45 on heavy trading. HZNP's options are also being exchanged at an accelerated clip, especially on the put side of the aisle.

Diving right in, put options are currently running in the 95th percentile of their annual range, and at 10 times the usual intraday rate. By the numbers, 1,063 puts are on the tape, more than doubling the 475 call options that have changed hands so far.

Surveying the past two weeks' worth of data, though, shows a much different picture. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open nearly 2,200 HZNP calls versus just 13 puts. The resultant 10-day call/put volume ratio stands at an astronomical 168.77, and also represents an annual high.

This optimism is reflected within the brokerage community, too. Five analysts currently rate HZNP a "strong buy," compared to two "holds" and not a single "sell." If that's not enough, the stock's consensus 12-month price target of $31.33 represents a lofty 70% premium to current trading levels.

Based on today's price action, though, the skeptics -- particularly, short sellers -- are being proven right. These bearish bets jumped 8.4% in the most recent reporting period, and represent 12.3% of HZNP's float -- or about a week of trading activity, based on the stock's typical trading pace. In fact, it's possible some of the aforementioned call buyers were actually short sellers seeking an upside hedge.

Today is hardly the first time Horizon Pharma PLC (NASDAQ:HZNP) has struggled on the charts. Even heading into the session, the shares had been reeling since exploring their 2016 highs north of $23. As it is, the stock is currently saddled with a year-to-date loss approaching 15%.

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