The continuation of the sell off in Biotech and large Pharma stocks could not have come at worse time for most investors, a week before what had otherwise been a stellar year for the sector.
Here is some untied, generally directional options activity that caught my eye during Tuesday’s trading, primarily in healthcare:
1. CELG – at one point on Tuesday, the stock was down almost 14% from the all time high it made earlier in the month, only to close a tad of its lows, but still down 6.5%. Total options volume ran more than 3.5x average daily, with the Jan 100 puts the most active with almost 7000 trading, most looking like they were bought.
There looked to be some short term hedging of some large pharma names with short dated generally low premium out of the money puts:
2. PFE – when stock was 31.36 there was an opening buyer of 15,000 Jan 31 puts for .39 when stock, 21,700 ended up trading in this strike on the day. I think it is important to note that PFE seemed to find its footing in the mid point of the daily range, despite closing down 2% on the day:
3. JNJ – when the stock was 105.22 a buyer paid .65 for 17,000 Jan 102 puts to open, 23,000 ended up trading on the day, with total volume running 2.5x average daily. Unlike PFE, JNJ failed to close too much off of the morning lows:
4. ABBV – the stock basically closed on the dead lows of the session, down nearly 4%. Options volume ran 1.5x average daily with a block of May 60 puts being bought to open for 2.20 when stock was 66.65.
5. GILD – since the ABBV HepC pricing disclosure Friday afternoon, GILD has been ground zero for the sector’s destruction, with the stock down almost 18% since Friday’s close, losing almost $25 billion in market cap. Options volume ran 3x average daily volume, with calls outnumbering puts more than 2 to 1, with 9 of the top 10 strikes all calls with 14,000 of the Jan 95 calls trading and 10,000 of the Feb 100 calls trading. It appears that traders were closing out of prior bullish bets in the stock, as much of the call volume looked closing.
6. VNDA – There was one piece of good news in the biotech space, Novartis (NVS) and Vanda Pharma (VNDA), agreed to settle arbitration with NVS having to buy $25 million of VNDA stock (among other things), which is not insignificant for the $500 million market cap company. Total options volume for VNDA ran hot at more than 20x average daily. About an hour after the open, when the stock was $14.21 there was a buyer of a bullish risk reversal in Jan, selling 4500 Jan 14 puts at .65 to open to buy 4500 Jan 16 calls for .45, this package cost 20 cents, and breaks even at $16.20 on the upside on Jan expiration, with losses of 20 cents between 16 and 14 and additional loses one for one below 14. There was also longer dated call buying with 2000 of the March 15 calls bought for 1.65 when the stock was 13.90, and a buy of 1000 June16 calls bought for 1.0 when stock was 13.73, both were opening.
7. BABA – the stock closed down 3% on the day, right on its 50 day moving average. Options volume ran hot at about 1.3x average daily. When the stock was 106, there was a seller of 2000 Jan 110 put at 6.30, in conjunction with a sale of 1000 Jan 105 put at 3.50, both closing with what looks like a roll down and out, with an opening buy of 3600 Feb 100 put for 4.30.