Options Traders Blitz Biotech ETFs as Trump Talks Drug Prices

XBI has seen a pop in call volume

Karee Venema
May 11, 2018 at 2:32 PM
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Healthcare stocks are in focus this afternoon, after President Donald Trump unveiled a plan lower drug prices not long ago, entitled "American Patients First." The sector is trading higher following the highly anticipated event, and options traders are clamoring to hop in on the action.

XBI Pop Draws Short-Term Options Bulls

At last check, call volume on the SPDR S&P Biotech ETF (XBI) was running at an accelerated clip, with 16,000 contracts traded so far. Buy-to-open activity has been detected at the weekly 5/11 91-strike call. Breakeven for call buyers at tonight's close is $91.17, based on the call's volume-weighted average price of $0.17.

The exchange-traded fund (ETF) was most recently seen trading up 1% at $89.92, bringing their week-to-date gain to 2.9%. More broadly, the shares have had a choppy run in 2018. However, XBI's 200-day moving average emerging as a springboard during a recent pullback from its mid-March peak of $97.87 -- and it is one of the best ETFs to own in May.

xbi price chart may 11

IBB Rallies Into Familiar Resistance

The iShares Nasdaq Biotechnology ETF (IBB) has seen in influx of call and put trading today, with about 6,800 of the former and 8,000 of the latter exchanged -- two times what's typically seen at this point in the day. Bulls appear to be purchasing new positions at the May 106 call, while bears seem to be buying to open weekly 5/11 105-strike puts, betting on a reversal lower by tonight's close.

Most recently, IBB shares were up 1.3% to trade at $105.04. It's been dismal year for the ETF -- struggling in step with the pharmaceutical sector -- down 1.6% in 2018. The fund has been pressured lower by its 40-day moving average since late March, with this trendline rearing its ugly head as resistance earlier today.

ibb price chart may 11


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