Despite yesterday's broader-market downturn
, Halozyme Therapeutics, Inc.
(NASDAQ:HALO) advanced a whopping 8.6% to its closing price of $6.68. On top of that, 5,206 calls changed hands -- seven times the daily norm -- compared to only 291 puts.
Most of this bullish betting took place at HALO's July 7.50 call, where 4,231 contracts crossed for a volume-weighted average price (VWAP) of $0.49. Of these contracts, 86% went off at the ask price, implied volatility increased by 4.8 percentage points, open interest added 3,475 positions overnight, and volume exceeded open interest, all conveying heavy buy-to-open activity.
Yesterday's call buyers are anticipating that HALO will hurdle north at least 24.1% from its current perch of $6.44 to finish above the breakeven price of $7.99 (strike price plus the VWAP) by the close on July 19, when front-month options expire. If HALO fails to cross the barrier -- last reached on May 20 -- and remains south of the 7.50 strike, the call buyers stand to lose the initial premium paid per contract.
During the past month overall, speculators have bought to open 755 HALO calls for every 100 puts, according to the stock's International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) 20-day call/put volume ratio of 7.55. Still, short interest accounts for 11.6% of HALO's available float, representing considerable pessimism among stock traders. Therefore, it is possible that some of the heavy call activity is due to short sellers hedging their bearish bets.
Jumping outside the options pits, four out of the seven analysts weighing in on HALO -- which has lost more than 26% year-over-year -- endorse the stock as a "strong buy," while only two view it as a "hold," and one gives it a "sell" recommendation. Likewise, analysts' consensus price target stands at $8.14, which demonstrates expected upside of 26.4% from current levels.
This article by Milissa Hudepohl was originally published on Schaeffer's Investment Research.
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