The Technical Level Sarepta Therapeutics Inc (SRPT) Options Players are Watching

Sarepta Therapeutics Inc (SRPT) is booming on upbeat drug news

Jan 10, 2017 at 2:57 PM
facebook X logo linkedin

Sarepta Therapeutics Inc (NASDAQ:SRPT) is 21.2% higher at $37.89, after earlier being halted for volatility, on news the company's launch of its controversial Duchenne muscular dystrophy (DMD) treatment is going better than expected. Specifically, CEO Edward Kaye noted that more than 250 patients in the U.S. are in the process of getting the drug -- well above predictions. Meanwhile, the company also announced a licensing agreement with Nationwide Children’s Hospital for an experimental gene therapy program. All the news has caught the attention of options traders, who seem to have a round-number target in mind.

Digging right in, SRPT options are trading at seven times the usual intraday rate, with calls more than doubling puts. In fact, call volume is currently running in the high 94th percentile of its annual range. Topping today's action is the January 2017 40-strike call, followed closely by the 40-strike put, with a mix of buying and selling at each -- though, in both cases, open interest outstrips volume. Notably, call buyers are likely getting a much better deal than put buyers, as SRPT's 30-day at-the-money implied volatility skew is seated in the 100th annual percentile.

Even with today's jump, there's reason to believe SRPT may have a hard time surpassing the round $40 level. After all, the January 2017 40-strike call is home to peak open interest among all the stock's options, and data from the major exchanges confirms a large number of these positions were bought to open. An unwinding of the hedges related to these bets could cause the strike to act as resistance as front-month expiration approaches.

What's more, SRPT hasn't closed a day above $40 since Nov. 10. Plus, the round-number level corresponds with a 61.8% Fibonacci retracement of the stock's September 2016 low and high, potentially reinforcing resistance. On the bright side, SRPT is on pace to finish today above its 30-day moving average for the first time since October.

SRPT Daily Chart January 10

A look at recent options action suggests today's preference for SRPT calls is nothing new. Across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock has seen more than five calls purchased for each put over the past two weeks. Moreover, the resulting call/put volume ratio of 5.33 ranks higher than 90% of all readings from the last 12 months.

Elsewhere, short interest has been steadily falling, dropping roughly 60% since topping out at a record peak last May. Analysts also seem to be on board with Sarepta Therapeutics Inc (NASDAQ:SRPT), as 71% of the firms providing coverage maintain a "buy" or better opinion, without a single "sell" rating in sight. In fact, an analyst at Baird waxed optimistic on SRPT today, reiterating an "outperform" rating and a price target of $102 -- a level the shares haven't seen in almost 17 years. Plus, the brokerage firm underscored Sarepta as its top mid-cap pick for 2017.

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 calls
238.5% GAIN on Oracle calls



Rainmaker Ads CGI