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Biogen Bombshell Triggers Annual-High Options Volume

Short-term bulls expect BIIB stock to topple $300

Oct 22, 2019 at 12:58 PM
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The shares of Biogen Inc (NASDAQ:BIIB) have skyrocketed today, after the company surprised investors with plans to submit its Alzheimer's treatment for regulatory approval in the U.S. Biogen discontinued two late-stage trials of aducanumab earlier this year, but said later data showed encouraging results in memory, language, and orientation among patients. The company expects to submit a marketing application to the Food & Drug Administration (FDA) early next year, and CNBC's Jim Cramer said it could be "the biggest drug ever." As such, BIIB stock and options volume are pacing for annual highs today.

The discontinued drug trials in March sent Biogen shares plummeting, and the equity spent the subsequent months range-bound in the $215-$245 region. Today, BIIB is up 27.6% at $285.15, pacing for its biggest single-session percentage gain since at least 1999. Further, the shares are set to end north of their 320-day moving average for the first time since the March bear gap, and earlier peaked at $318. A close north of $300.92 would put Biogen stock back in the black on a year-to-date basis.

BIIB stock chart 1022

More than 16 million Biogen shares have changed hands so far today, on pace to topple the March 21 annual high of about 21.6 million. Meanwhile, overall options volume has already surpassed the March peak of just under 77,000 contracts, with more than 118,000 contracts exchanged so far, and several hours of trading left to go.

Specifically, roughly 49,000 BIIB calls and 69,000 puts have traded -- about 20 times the average intraday volume. For context, the security averages daily call and put volume of around 6,600 and 6,700 contracts, respectively.

The weekly 10/25 series -- which expires at the close this Friday, Oct. 25 -- accounts for the 10 most popular BIIB options today, with all of the strikes seeing new positions opened. Topping the list is the weekly 10/25 300-strike call, buyers of which expect the stock to topple the aforementioned $300 level by week's end.

Taking runner-up is the weekly 10/25 275-strike put, though much of that action crossed on the bid side, hinting at seller-driven volume. By writing the puts to open, the sellers expect BIIB shares to stay north of $275 through the end of the week. In this best-case scenario, the puts will expire worthless, allowing the traders to retain the entire premium received upon initiation.

Should today's massive rebound hold, several analysts could upwardly revise their ratings on BIIB. Currently, the equity boasts just five "buy" or better endorsements, compared to 18 "hold" or worse recommendations. Likewise, the consensus 12-month price target of $256.85 now stands at a roughly 10% discount to current levels, suggesting price-target hikes could be on the horizon.


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