LVGO Options Go Off During Stock's Massive Rally

Calls have been popular during the stock's lifetime

by Josh Selway

Published on Oct 7, 2019 at 2:18 PM
Updated on Jun 24, 2020 at 10:16 AM

The shares of Livongo Health Inc (NASDAQ:LVGO) were last seen trading up 15.5% at $20, after the digital healthcare management company announced a deal where it'll provide its service for all Federal Employees Health Benefits Program members who have Type 1 or Type 2 diabetes. This prompted a note from SVB Leerink, which said to "aggressively" buy the equity. In response, more than 1,800 calls have traded, compared to a daily average of 588, while only 125 puts have crossed.

Driving the unusual volume is opening activity at the November 22.50 call, where traders could be betting on more upside over the next month and a half. Close behind is the front-month October 22.50 call, though most of these contracts seem to have crossed near the bid price -- hinting at sell-to-open activity. These call writers would be betting on the $22.50 level serving as a ceiling.

The penchant for calls actually reflects what's been happening longer term for Livongo Health. The 10-day call/put volume ratio for the stock at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is now 1.68, showing how much more popular call buying has been compared to put buying. Peak open interest coming into today was at the November 20 call, followed by the November 25 call.

Analysts have been bullish on the stock, with all five in coverage recommending to buy LVGO, which began trading publicly back in July. LVGO traded as high as $45.68 shortly after the initial public offering (IPO), but has fallen sharply since, hovering on oversold territory coming into today, based on its 14-day Relative Strength Index (RSI) of 30.


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