Option Bulls Circle Sizzling Celgene Corporation (CELG)

Celgene Corporation (CELG) has caught fire, thanks to upbeat earnings and guidance

Oct 27, 2016 at 12:08 PM
facebook twitter linkedin


While the coming months historically haven't been kind to Celgene Corporation (NASDAQ:CELG), the biotech stock is seizing the day. At last check, CELG shares have shot 7.2% higher to trade at $105.46, buoyed by an earnings beat and upwardly revised guidance. As the stock sizzles -- with intraday volume in the 98th annual percentile -- its options pits are also heating up.

Diving right in, the options action is especially busy on the call side of the aisle. About 37,000 contracts are on the tape, six times the expected intraday volume, and nearly four times the number of puts traded so far. The most active option is the weekly 10/28 105-strike call, where traders may be purchasing new positions -- expecting CELG to muscle atop $105 by tomorrow's close, when the series expires.

This call-skewed activity is reflected by data at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Specifically, traders have bought to open nearly three CELG calls for each put in the past two weeks. Not to mention, the resultant call/put volume ratio of 2.92 is approaching the top quartile of its annual range.

Underscoring the call bias is Celgene's Schaeffer's put/call open interest ratio (SOIR) of 0.64. Not only is this ratio call-heavy on an absolute basis, it also ranks below 93% of all other readings taken in the prior 12 months.

Optimism isn't hard to find elsewhere on the Street, either. While short interest jumped over 29% in the past two reporting periods, these bearish bets comprise just 1.2% of CELG's total float. More impressive yet, 15 of 18 analysts rate the stock a "strong buy," compared to three "holds" and not a single "sell."

Whether or not Celgene Corporation (NASDAQ:CELG) deserves all of this love is another question altogether. Technically, the stock has given up 10.6% since its most recent high of $117.90, notched in early August. And while today's breakout is impressive, CELG has run into a familiar speedbump at the 50-day moving average.

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.


A Schaeffer's exclusive!

The Expert's Guide

Access your FREE trading earnings guide for Q3 before it's too late!


  
 
Special Offers from Schaeffer's Trading Partners