Puts Active After RBC Downgrades Incyte Stock

RBC is skeptical of INCY's growth opportunities going forward

Managing Editor
Apr 3, 2019 at 2:21 PM
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The shares of Incyte Corporation (NASDAQ:INCY) are down 2.8% to trade at $84.30, after RBC downgraded the biotech name to "sector perform" from "outperform." The analyst in coverage doesn't see any more opportunities for near-term growth, and that its underappreciated value is already baked in. In the wake of the downgrade, INCY options bears have come out of the woodwork. 

More specifically, over 1,000 INCY put options have changed hands today -- four times the expected intraday amount, and double the number of calls traded. There's notable activity at the June 80 put, where it appears new positions are being opened. If this is the case, options traders are banking on an extended pullback from Incyte stock in the coming months.

This runs converse to the trend in recent weeks. Amid limited absolute volume, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows speculative players have bought to open 1,071 calls in the last 10 sessions, compared to just 40 puts. Plus, the resulting 10-day call/put volume ratio ranks 2 percentage points from an annual high, showing unusual demand for long calls over puts in recent weeks.

While Incyte stock nabbed an annual high of $88.83 on March 4, the $88 level has served as stiff resistance in 2019. Today's drop means INCY could snap its weekly winning streak at three, with the pullback now testing the 40-day moving average. However, the security is vulnerable to more downgrades. Exactly two-thirds of the brokerages in coverage rate INCY a "buy" or better, with zero "sells" on the books.

Daily Stock Chart INCY

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