Options Pop on Alexion Stock Amid Patent Questions

Three of the drugmaker's patents for Solaris will be reviewed

Managing Editor
Aug 30, 2019 at 12:50 PM
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One of the worst stocks on the Nasdaq today is Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) down 9.6% to trade at $101.44 today. The U.S. patent office will review three patents for the drugmaker's rare disease treatment Solaris, after Amgen (AMGN) filed a petition challenging the patents. A final outcome is expected in 18-24 months. In response to the news, options traders have come out in droves today.

More specifically, 7,300 options have already changed hands -- four times the average intraday amount and volume pacing for the 100th percentile of its annual range. Leading the charge is the September 135 call, but there are also new positions being opened at the November 85 put. 

The $85 level would mark territory Alexion stock has not traded at since late 2012. Today's drop -- on track for its worst since October 28 -- has ALXN clinging to its year-to-date breakeven point, and near the site of its Jan. 4 lows. Since an April 10 annual high of $141.86, the drug stock carved out a channel of lower highs to the tune of a 29% drop. 

Daily Stock Chart ALXN

Calls dominate the picture in Alexion's options pits. In the last 10 days, 17,232 long calls crossed at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), compared to just 1,395 puts. Plus, this ratio ranks 2 percentage points from an annual high, pointing to a greater-than-usual clip of call buying over put buying in the last two weeks. 

Echoing this, the security's Schaeffer's put/call open interest ratio (SOIR) of 0.33 ranks in the bottom 3rd percentile -- show a very unusual call-skew among short-term speculators.

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