Clovis Oncology Call Volume Spikes After Downgrade

CLVS shorts could be hedging with call options

Sep 24, 2019 at 2:08 PM
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SVB Leerink downgraded Clovis Oncology Inc (NASDAQ:CLVS) stock to "market perform" from "outperform," and slashed its price target by $12 to $10. The analyst in coverage called CLVS' licensing deal with German radiopharmaceutical therapies firm 3B Pharmaceuticals "ill-timed given investor concerns about the company's use of cash," and said "it burdens Clovis with development expenses and milestones."

In reaction, CLVS stock hit a record low of $3.97 earlier, last seen down 6.5% at $4.29 -- headed toward its sixth straight daily loss. It's been a steady slide for the shares since a late-February rejection at their 200-day moving average, down more than 86%. More recently, the equity's 30-day moving average has applied pressure, as well as an early August bear gap near $5.80.

Several options traders today are targeting a quick rebound for Clovis Oncology stock. Intraday call volume is running hot, with nearly 9,700 contracts traded so far -- 10 times what's typically seen at this point. The October 5 call is most active, and it looks like some of the activity here could be of the buy-to-open kind. If this is the case, speculative players are eyeing a breakout above $5 by expiration at the close on Friday, Oct. 18.

This accelerated call volume is nothing new in CLVS' options pits, though. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio of 24.38 registers in the 91st annual percentile, meaning calls have been bought to open over puts at a quicker-than-usual pace.

However, given how heavily shorted Clovis Oncology is, it's possible that some of this call buying has been at the hands of shorts hedging against any upside risk. Short interest on CLVS more than doubled in the two most recent reporting periods to 20.94 million shares -- the most on record, and roughly 40% of the security's available float.

clvs stock daily price chart on sept 24


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