Abbott Labs' 15-Minute COVID-19 Test Gets FDA Approval

Baird called the new test a game changer

Deputy Editor
Aug 27, 2020 at 11:24 AM
facebook twitter linkedin


The shares of Abbott Laboratories (NYSE:ABT) are trading at fresh highs this morning, up 7.2% at $110.64 after the U.S. Food and Drug Administration (FDA) granted Emergency Use Authorization to its COVID-19 portable antigen test. The test can deliver results within 15 minutes -- much shorter than the testing methods currently being used -- and will sell for $5. Abbott said it expects to ship 50 million tests one month from the beginning of October.  

One J.P. Morgan analyst chimed in, saying he believes the test will be vital for society to return to a sense of normalcy, adding that the shorter wait times will enable better tracking and spread prevention. Meanwhile, Baird called the test a game changer. The majority of brokerage firms covering the security are already quite optimistic, however. Of the 15 in coverage, 80% consider ABT a "buy" or better. 

This news has the options pits abuzz with activity, too. So far, 81,000 calls have crossed the tape, which is 24 times the intraday average, with volume running in its top annual percentile. Put volume has picked up too, with the 7,752 puts exchanged so far running at eight times the intraday average. The most popular contract is the weekly 9/4 12-strike call, where positions are being opened. This is followed by the weekly 8/28 120-strike call, where positions are also being opened. 

This tendency toward calls has been the norm, though. In the last 10 days, 3.93 calls were picked up for every put at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits in the 87th percentile of its annual range, suggesting a much healthier-than-usual appetite for bullish bets of late. 

A longer term look at ABT shows the equity has been steadily climbing into uncharted territory since late last month after springboarding off long-time support at the 100-day moving average. The 30-day has also given Abbott stock a boost, pushing it toward the 27.5% year-to-date gain that it currently boasts. 

ABT Aug 27

On a final note, traders might want to get in on ABT's surge while options are still relatively cheap. Abbott's Schaeffer's Volatility Index (SVI) of 25% sits higher than just 15% of readings from the past 12 months. This means options players are pricing in low volatility expectations at the moment.


A Schaeffer's exclusive!

The Expert's Guide

Access your FREE trading earnings guide for Q3 before it's too late!


  
 
Special Offers from Schaeffer's Trading Partners