Geron Options Volume Soars as Traders Play Detective

A Johnson & Johnson job posting has GERN stock skyrocketing

Aug 24, 2018 at 2:19 PM
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The shares of biotech concern Geron Corporation (NYSE:GERN) are skyrocketing today, with some attributing the burst to a Johnson & Johnson (JNJ) job posting. Specifically, JNJ's Janssen is expected to decide whether or not to continue development of Geron's Imetelstat by the end of the third quarter, and the blue chip's opening for a "Strategic Pricing Manager for Imbruvica & Imetelstat" suggests the pair will continue a partnership. Against this backdrop, GERN options are flying off the shelves today.

Geron stock was last seen 27.3% higher at $5.13. The shares earlier topped out at $5.81 -- territory not charted since March, when GERN was flirting with four-year highs -- and are pacing for their best session since March 19, when they went on a tear after earnings and mid-stage Imetelstat data. More recently, since the equity's last test of support in the $3.25 region and its 160-day moving average, GERN has added roughly 58%.

GERN stock chart aug 24

Geron options are trading at seven times the average intraday pace, with about 21,000 calls and 26,000 puts exchanged so far. Put volume has already surpassed the stock's current annual high of about 18,000 contracts, set on March 22, and call volume is also set to touch a new high.

Most active is the October 4 put, with more than 10,500 contracts exchanged. However, it seems a healthy portion of the puts were likely sold to open, suggesting traders expect GERN stock to remain north of the $4 level through the close on Friday, Oct. 19, when the options expire. If this happens, the sellers can retain the entire premium received at initiation, as the puts will expire worthless.

It's a good time to sell premium, too, as GERN's 30-day at-the-money implied volatility has rocketed to 208% today -- in the 100th percentile of its annual range. That's compared to the stock's 30-day historical volatility of just 60%, suggesting near-term options are pricing in relatively high volatility expectations for the shares -- resulting in greater reward for premium sellers.

Elsewhere, quite a few short sellers could be shaking in their boots. Geron short interest shot 10.6% higher in the past two reporting periods, and now accounts for more than 36% of the equity's total available float. At GERN's average pace of trading, it would take about three weeks to buy back these bearish bets.

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