Downgraded Biogen Stock Attracts Options Bears

Stifel downgraded BIIB stock to "hold" from "buy"

Feb 21, 2019 at 11:38 AM
    facebook twitter linkedin

    Biogen Inc (NASDAQ:BIIB) stock is sinking, after Stifel downgraded it to "hold" from "buy," and cut its price target by $51 to to $346. The brokerage firm expressed concern over BIIB's Alzheimer's drug after Roche Holding ended late-stage trials for similar treatments targeting beta-amyloid last month, as well as a patent review for its multiple sclerosis drug, Tecfidera, and increased competition for its muscular atrophy treatment, Spinraza, saying Biogen "has become a harder story for us to get behind with optimism and conviction."

    This shift to a more pessimistic tone is relatively rare among analysts, with the vast majority of the 21 covering brokerages still maintaining a "buy" or better rating, and not a single "sell" on the books. Plus, the average 12-month price target of $385.63 stands at a 19.5% premium to BIIB's current perch at $322.83, down 3.7% so far today.

    Options traders have been bullish toward Biogen stock, too. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 1.43 ranks in the 71st annual percentile, meaning calls have been bought to open over puts at an accelerated clip.

    However, signs of skepticism are starting to show in this bunch, as well. Amid relatively low absolute volume so far, puts are trading at 1.1 times the average intraday rate and are outpacing calls by a nearly 3-to-1 ratio.

    The weekly 2/22 327.50-strike put is most active, and it looks like new positions are being purchased for a volume-weighted average price of $4.12. If this is the case, breakeven for the put buyers at the close tomorrow, Feb. 22, is $323.38 (strike less premium paid).

    On the charts, BIIB stock has been stuck churning beneath the $345-$350 levels since a late-July data-driven bear gap sent it careening from its multi-year high of $388.76. More recently, the shares have run into resistance at a trendline connecting lower highs since late January, and today's downside puts Biogen at risk of closing back beneath its 200-day moving average.

    biib stock daily price chart feb 21




    These investors are using the market's volatility to their advantage and scoring triple-digit gains on many of their trades.

    Even in today's sideways bear market, this trading strategy has continued to provide consistency and profitability to a small group of investors. By using this approach, these traders are removing directional risk and still hitting triple-digit returns. If you want access to this strategy, and lower risk with higher returns sounds good to you, then don't wait another minute.

    Join us now to receive our next trades the moment they come out!


    Common mistakes options traders make


    Special Offers from Schaeffer's Trading Partners