Citron Thinks This Stock Could Quadruple

NVTA call options are flying off the shelves ahead of earnings

by Andrea Kramer

Published on Jul 31, 2019 at 2:41 PM

The shares of genetic testing concern InVitae Corp (NYSE:NVTA) are fresh off an all-time high of $28.38, last seen 1.6% higher at $27.60, thanks to a boost from Citron Research. The firm said it will "continue to stay long until the stock hits at least $65, as we believe it is on its way to $100" -- nearly four times yesterday's close of $27.21. Further, Citron called InVitae "the most exciting company you have not heard of," and said it's "not concerned about next week's earnings, as we would happily buy more on any dip." As such, NVTA call options are white-hot this afternoon -- and option bulls may be onto something, if recent history is any indicator.

InVitae shares have already more than tripled over the past year, and today's quest for record highs took the stock past a former speed bump in the $26-$27 region. Nevertheless, and despite a potential volatility catalyst on the horizon, NVTA's near-term options were relatively inexpensive heading into today's session. The stock's Schaeffer's Volatility Index (SVI) of 76.6% was in the 19th percentile of its annual range.

NVTA stock chart july 31

Over the past five years, there have been just two other times when NVTA was within 2% of a 52-week high and simultaneously sported an SVI in the bottom 20% of its annual range. The security rallied after both of those signals, averaging a one-month gain of nearly 44%, per data from Schaeffer's Senior Quantitative Analyst Rocky White.

As alluded to earlier, NVTA calls are flying off the shelves after today's Citron note. The equity has seen more than 5,500 calls change hands -- three times the average intraday volume, and roughly eight times the number of puts exchanged. Among the most active is the August 20 call, new buyers of which expect the underlying stock to extend its trek north of $20 in the short term.

InVitae is slated to report earnings after the close on Tuesday, Aug. 6. After the company's last eight earnings reports, NVTA averaged a one-day reaction of 12.2%, including a 17.4% rally last August. This time around, the options market is pricing in a slightly bigger 15.2% swing.

Should the firm report stronger-than-expected numbers next week, a short squeeze could add fuel to the equity's fire. Short interest accounts for nearly 23% of NVTA's total available float, representing more than a week's worth of pent-up buying demand, at the stock's average pace of trading.


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