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Celgene Corporation Bulls Predict New Near-Term Highs

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Front-month call players converge on CELG.

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Bullish betting has been running a bit hotter than usual on Celgene Corporation (NASDAQ:CELG) lately, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). In fact, the stock's 10-day call/put volume ratio checks in at 3.82, conveying calls bought to open have almost quadrupled puts during the past two weeks. This ratio is docked in the 55th percentile of its annual range, indicating traders have been scooping up calls over puts at a slightly accelerated clip.

Today's session has proved to be no exception, as approximately 15,000 calls had been exchanged as of 12:30 p.m. ET. This is 3.6 times the security's anticipated intraday call volume, and more than double the number of puts traded. Leading the pack has been the March 105 call, which has seen over 5,100 contracts cross the tape at a volume-weighted average price (VWAP) of $1.65. It should also be noted that the equity's Schaeffer's Volatility Index (SVI) of 23% ranks higher than just 27% of similar annual readings, suggesting CELG's front-month options are relatively cheap right now.

A healthy portion of these near-the-money calls changed hands at the ask price, implying they were purchased. Meanwhile, today's volume has exceeded current open interest levels, and implied volatility has ticked higher during the course of the session -- both indications of buy-to-open activity. In other words, traders are expecting CELG to surmount the $106.65 mark (strike price plus the VWAP) by front-month expiration. The delta for this option sits at 0.46, suggesting these calls have a roughly 1-in-2 chance of finishing in the money.

The biopharmaceutical firm has been a technical outperformer lately, boasting a year-to-date gain of around 33%, while also besting the broader S&P 500 Index (SPX) by more than 21 percentage points during the past two months. In fact, the shares tagged a new record high of $104.72 during the morning hours of trading.

At last check, CELG is up 3.3% to wink at the $104.42 level.

This article by Terri Stridsberg was originally published on Schaeffer's Investment Research.

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No positions in stocks mentioned.
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