With options strike prices as high as 60/share and massive open interest controlling more than 2.1M shares. Some people (hedge fund managers) are betting more than $50M that this stock is going up big.
I see it now, the article at Option Monster. Though I think they are making a big mistake selling the $40 February calls. I know they are looking at buying the $30 for $7.40 and selling the $40 for $3.70 giving them $10 worth of price movement for a price for $3.70 (net $6.30 per share if it hits $40). The more interesting part is the options volatility index which projects a 78% that the $40/call will be taken out and a 55% chance that the $60 call will also be called away.
There is still an exceptionally large amount of call options on the January 15th call options at extremely high strike prices ($80 and $105).
Today's action is typical of a stock that spiked up just before option expiration. Many calls get the shares and frequently don't have the cash to keep the shares, so they simply sell them at market. The interesting point to watch will be late afternoon, tomorrow, and the rest of the week when this should pick up and end higher than we finished last week.
Risk in the stock is what creates the high premium, so anytime you get a lot for the covered call there is going to be risk. I don't mean to sound trite, but that is why the option premium is so high. The funny part about PTCT is it should rise up quite a bit from here so the options premiums will likely return. I'm buying back all my covered calls now and may consider selling them again in the future, but right now this is a gift to get to cover (buy to close) so cheaply.
Option premiums reflect the risk reduction in the news release. This is awesome for those of us who sold covered calls as now we can buy them back at a tiny fraction for what we got for them. Then just hold on to the shares and ride the capital appreciation up.
Go ahead and believe that if you want. P3 was more successful than anybody could have imagined.
Definitely agree that if Etep gets a CRL that would boost SRPT a lot. The $50 target isn't mine, but what I read that analysts were projecting. I hoped for higher too, especially since SRPT hit higher than $50 a year or two ago on the first batch of good news. News is even better today, so I hope $70-$80 does happen.
The AdCom date I was referring to was pointed to by TheStreet article on 7/20/2015 by Adam Feuerstein (I may have mis-interpreted it, but seemed right to me - though not a done deal yet):
Biotech investors, circle Nov. 23 and Nov. 24 on your calendars. Use a thick, black marker. These appear to be the tentative dates chosen by the U.S. Food and Drug Administration to convene an advisory panel for the Duchenne muscular dystrophy drugs from BioMarin Pharmaceuticals (BMRN - Get Report) and Sarepta Therapeutics (SRPT - Get Report).
The FDA's calendar of 2015 Advisory Committee Tentative Meetings was just updated with a Nov. 23-24 slot for the Peripheral and Central Nervous System Drugs Advisory Committee, which is the expert panel likely to be reviewing BioMarin's drisapersen and Sarepta's eteplirsen. No other information is provided in the FDA Web update and an agency spokesperson declined to offer any other information pending a listing in the Federal Register.
I wouldn't go near options on SRPT because there are too many negatives. BMRN shouldn't even have a drug in the running because it doesn't work and has major safety issues, yet has an Adcom date anyway. This shows the marketing power and influence of BMRN that may be a major issue for SRPT as a competitor, even though eteplirsen is a far better drug and has a much better safety record than drisapersen.
Management has been a problem at SRPT for a long time, with many delays in filing for the NDA with the FDA. While it appears there is some progress on that front, the NDA was accepted by the FDA, the recent secondary underscores that major issues still remain.
While the Call to Put ratio in January is heavily in favor of longs, the high option premium is prohibitive given the projections on the share price by major analysts. If you bought the January 15th $40 call options you'll have to pay $7.50, so the shares will have to go above $47.50 before you make any money. The $45 strike is at $5.50 making your break even point $50.50. All projections right now point to a $50 price target on approval, or maybe slightly higher, but not much, making the risk/reward unacceptable. Especially considering the binary event nature of drisapersen vs. eteplirsen. If both are approved, SRPT will uptick slightly (close to $50) and that is most likely going to be the case. Longs will benefit, options will break even, and shorts will lose.
From an options perspective the best I could hope for is break-even which is why I won't go near SRPT options.
Correct. 2-1 ratio of calls to puts, with put open interest around 5,100 open contracts and calls almost 11,000. That is still a very large hedge on the put side. The interesting parameter is the difference in premium. At the money they are both about the same, around $12-13/share with the share price at $31/share. However, the further away you go from the current price, the call options cost a lot more than the puts do and it diverges the further you go. This indicates to me that it favors the long side about 75% probability just purely based on the options action.
I tried to post a link, but Yahoo blocks links to their own web pages.
So, if using Yahoo Finance, get a quote on the current PTCT shares, and you will see on the column a link for "Options" 2 lines below "Summary" which is the current view. Once you click on Options, it should take you to the October 16, 2015 expiration date (and you can change that in the box in the top left under the current price quote).
Do be careful because sometimes the summary page does not show the accurate bid/ask/last-traded option price. You have to click on the link for the contract name (something like: PTCT151016C00040000) and then it will usually bring up the actual current quote. Not sure why that is a problem, but just be aware that sometimes that option summary page is off.
Also, go into any of your brokers web pages and get a current quote on the options and you should see something similar that shows you bid/ask price for the strike price at the various expirations.
I hope this helps.
Looking at the options open interest, premiums, and expiration date, it is apparent that some people believe this could ignite at any time. Even though the October 16 options expire next Friday (a week from tomorrow) they still command a very high premium (10%+ for the $40 strike, which means the stock has to go up 30% from here to hit that). Very high open interest too.
November is even bigger, with large open interest at a strike price of $80. Wow.
December is even bigger, with large open interest at a strike price of $100.
This indicates that there is a LOT of money at work thinking this is going to go way higher very soon.
That has nothing to do with it. The FDA makes approval decisions based on the drug itself and the efficacy and safety profile. They have approved many drugs where the company wasn't in a financial position to bring the drug to market and simply sold it to a larger pharma after approval, or took on a partner to help them bring it to market.
All the news is good. The option premiums on this stock are sky high, as is the open interest. The November 20, 2015 call strike at $40 is still around $9/share, making this look like a stock that is going to explode. The only question is when will it explode?
There are about 7,000 calls of open interest in October, controlling 700,000 shares.
There are about 12,000 calls of open interest in November, controlling 1.2M shares.
There are about 34,500 calls of open interest in December, controlling 3.45M shares.
That totals about 55,000 calls, controlling 5.5M shares of stock in the next 3 months.
With the option premiums so high (30%+) even at the high strike prices ($40 or more) it is indicative of a very large move coming very very soon.
A quick analysis of options open interest shows a massive disparity between call options and puts, indicating that something big is about to be released, and judging from the options premiums, it is going to be strongly favorable.