Options Volume Hits New High As AMAG Pharmaceuticals, Inc. (AMAG) Tanks

AMAG Pharmaceuticals, Inc. (AMAG) is getting hit hard, and the stock's options are flying off the shelves

Jan 9, 2017 at 3:33 PM
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As biotechs steal the spotlight today, one drugmaker is sitting out the rally. AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG) is getting hit hard, and both stock and options volume are at annual highs. Weighing heavily on AMAG shares is news that the drugmaker will discontinue a study of its pain autoinjector, Makena. This drug is the company's primary source of growth and cash flow, according to one Raymond James analyst, who also implemented a downgrade to "underperform" from "market perform" on AMAG.

Earlier, AMAG also reported weaker-than-expected preliminary fourth-quarter sales figures, and its full-year revenue guidance for 2017 largely fell short of analyst expectations. Further, AMAG Pharmaceuticals said it entered into a licensing agreement with Palatin Technologies, Inc. (NYSE:PTN) for the North American development and commercialization rights of Rekynda, which will cost AMAG $60 million up front, and up to $380 million in regulatory and sales milestones.

AMAG is currently the worst performer on the Nasdaq. Sitting on the short sale restricted list (SSR), the stock is down 34.9% at $23.25, with stock volume already more than twice its previous annual high, set on Feb. 29. However, the shares are currently testing the formerly supportive $23-$24 region.

170109AMAG

Puts are trading at 71 times their average intraday rate, and are outpacing calls nearly 2-to-1. Both put volume and call volume have already touched an annual high, with today's most active option being the May 30 put, with buy-to-open activity detected. The May 30 put also happens to be AMAG's top open interest position, with nearly 1,250 contracts already in residence.

Today's heavy put-skew is a change of pace for AMAG. The equity's Schaeffer's put/call open interest ratio (SOIR) of 0.39 sits just 2 percentage points from an annual low, indicating near-term traders have rarely been more call-skewed in the last 12 months. Meanwhile, over the last two weeks of trading, option players have bought to open 50.58 AMAG calls for every put at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This reading sits higher than 94% of all other readings from the past year, though volume in AMAG's option pits is light on an absolute basis, with just 607 and 12 calls traded in the past two weeks. 

Some of the recent call buying could be attributable to hedging action by short sellers, particularly at out-of-the-money strikes. More than 22.2% of AMAG Pharmaceuticals, Inc.'s (NASDAQ:AMAG) float is sold short, which would take more than six days of trading to cover, at AMAG's average daily volume. 

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