Analyst: This Medical Stock Could Triple

Nevertheless, NVAX put volume hit an annual high today

by Andrea Kramer

Published on Jan 28, 2019 at 2:09 PM

Vaccine maker Novavax, Inc. (NASDAQ:NVAX) is in the spotlight today, after analysts at H.C. Wainwright initiated coverage of the penny stock with a "buy" rating. The brokerage firm also set a price target of $6 -- nearly triple NVAX's closing price on Friday -- waxing optimistic on Novavax's ResVax vaccine, which the analysts said could generate annual sales of more than $2 billion by 2025. Nevertheless, NVAX shares have erased early gains in afternoon trading, and it looks like one option bear may be extending their position.

Novavax stock initially surged as high as $2.33 in early trading, but was last seen 1.4% lower to trade at $2.16. The shares have nearly doubled since touching an annual low of $1.15 in early August, riding a trendline marking higher lows. However, the $2.50-$2.60 neighborhood capped NVAX's advance in December, and is the site of the stock's early 2018 highs. This region also limited the stock's upside momentum back in late 2016, following a massive bear gap stemming from ugly RSV vaccine data.

NVAX stock chart jan 28

At last check, roughly 15,000 NVAX puts have changed hands today -- eight times the average afternoon clip, and already marking an annual daily high. Most of the action has transpired at the February 2 and March 2 puts, which saw symmetrical blocks traded just after midday. It appears one trader may be rolling their bearish position, liquidating February 2 puts to buy March 2 puts. The newly purchased puts will move into the money if NVAX sinks back below $2 by Friday, March 15, when the options expire.

Today's appetite for short-term puts runs counter to the trend, though. The security's Schaeffer's put/call open interest ratio (SOIR) of 0.45 indicates that call open interest more than doubles put open interest among options expiring within three months. However, considering NVAX is a penny stock, it's not too surprising to find more calls than puts open, considering the equity's limited downside potential.

But that hasn't stopped short sellers from piling on. Short interest on the stock surged 14.5% in the past two reporting periods, and now accounts for more than 21% of NVAX's total available float. At the stock's average pace of trading, it would take more than a week to buy back these bearish bets.

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