Options Heat Up on "Undervalued" Drug Stock

AXGT stock is soaring after a new "outperform" rating

Jun 21, 2019 at 10:34 AM
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The shares of Axovant Gene Therapies Ltd (NASDAQ:AXGT) are soaring today, thanks to some upbeat analyst attention. Specifically, SVB Leerink initiated coverage of AXGT stock with an "outperform" rating and $18 price target -- more than three times yesterday's close of $5.79. The analyst called the shares "undervalued," partly due to "market fixation on the failed Alzheimer's program" and controversy around parent company Roivant Sciences. Against this backdrop, AXGT options are flying off the shelves today.

Axovant stock was last seen 17.4% higher at $6.80, set to close atop its 30-day moving average for the first time since mid-March. Further, the security is eyeing its biggest one-day gain in a year. The shares have struggled in 2019, to say the least, giving up 13.5% year-to-date and touching an all-time low of $3.81 on June 11, following an earnings miss. Today, however, AXGT stock is back in the black on a month-to-date basis.

AXGT stock chart june 21

While absolute volume remains light, Axovant options are red-hot this morning. The equity has already seen more than 900 calls change hands -- six times the average intraday pace. Meanwhile, more than 400 AXGT puts have traded so far -- 44 times the norm, an far surpassing the equity's average daily put volume of just 61 contracts.

The now near-the-money June 7 strike is most popular among both call and put traders. It looks like the calls are likely being sold to close ahead of options expiration at the close of trading today, but possible sell-to-open activity has been detected on the put side. By writing the June 7 puts to open, the traders expect AXGT shares to finish north of $7 at the close today. In this instance, the puts will expire out of the money, and the sellers can pocket the entire premium received from the sale.

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