Scathing Citron Note Ignites a Run On Express Scripts Holding Company (ESRX) Puts

One put player may have put up six figures betting against Express Scripts Holding Company (ESRX)

Dec 8, 2016 at 3:20 PM
facebook X logo linkedin


Express Scripts Holding Company (NASDAQ:ESRX) appears to be the latest victim of notorious short seller Citron Research. The firm's scathing comments have sent numerous names plummeting in the past, and it's more of the same today. At last check, ESRX has dropped 7.6% to $70.07 amid heavy stock and options volume, after Citron called the company the "Philidor of the pharma industry," and added that Express Scripts is "the culprit behind pharmaceutical price gouging."

What's more, the short seller made reference to President-elect Donald Trump's recent comments regarding a crackdown on drug prices, suggesting that when Trump takes action against ESRX, "heads will roll." Citron likewise set a low $45 price target -- territory not seen in roughly five years.

With ESRX on the short-sale restricted list, puts are trading at 12 times the typical intraday rate, and have already hit an annual high for daily volume. Today's short-term traders may be paying extra-high premiums, too, as the stock's 30-day at-the-money implied volatility has more than doubled from Wednesday's close to notch a new 12-month peak, at 57.1%.

Leading today's action is the December 74 put, where a 5,391-contract block was traded earlier today for $1.55 apiece. If these puts were bought to open -- as Trade-Alert suggests -- the trader paid an initial premium of over $835,000 (premium paid * number of contracts * 100 shares per contract). The goal would be for ESRX to extend its run south of $74 though front-month expiration at the close on Friday, Dec. 16. However, it's worth noting the contract is currently being bid at $4.70, suggesting the potential buyer is already staring at paper profits of more than 200%.

From a broader standpoint, put buying is nothing new in ESRX's options pits. In fact, the stock's 50-day put/call volume ratio of 1.63 across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks higher than 79% of the past year's readings. Likewise, its Schaeffer's put/call open interest ratio (SOIR) of 0.96 -- in the 69th annual percentile -- indicates near-term speculators are more put-skewed than usual.

There's plenty of pessimism to be found outside of the options pits, as well. Short interest on the stock, while relatively low at 4% of ESRX's available float, saw a 5% uptick in the most recent reporting period. Plus, 11 of 19 tracking analysts currently call the equity a "hold" or a "strong sell."

While it's hard to say whether Citron's claims have any merit, Express Scripts Holding Company (NASDAQ:ESRX) certainly hasn't been much to write home about, from a technical point of view. The shares have widened their year-to-date loss to nearly 20%. The stock now finds itself back in the $69-$71 region, where it spent the bulk of September and October trading sideways.

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.
 

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls

 
 
 


 
 

Rainmaker Ads CGI