Monday Options Update: NVAX, BMRN, TIVO & OI

Novavax, Inc. (NVAX) – Shares of the innovative biopharmaceutical company have exploded upwards by 107.75% to $2.95, attracting the interest of option investors who have traded more than 9,300 contracts on the stock up from the existing open interest of just over 1,000 lots. The Maryland-based, flu vaccine maker has been developing a vaccine that has apparently been effective in treating patients with a deadly strain of bird flu. Thus, the firm’s shares surged as the swine flu outbreak continues to spread and the demand for flu vaccines soars. Option traders looking to take delivery of the underlying stock targeted the June 5.0 strike price and purchased about 1,000 calls for an average premium of 65 cents apiece. In order for these call options to land in-the-money by expiration, shares would need to continue upwards by another 69%. Elsewhere, investors looking to take in call premium on today’s share price rally sold about 1,500 calls at the in-the-money May 2.5 strike price for 1.18 apiece as well as shed some 1,100 calls at the June 5.0 strike for about 65 cents each. The premiums enjoyed by investors at both strike prices will be fully retained if shares fall below $2.50 by May’s expiration and below $5.00 by expiration in June. Currently, shares are just a scant 46 cents off of the 52-week high of $3.41 attained back on September 19, 2008.

BioMarin Pharmaceuticals, Inc. (BMRN) – The biopharmaceutical company has experienced a share price rally of more than 5% to $13.08 amid unconfirmed rumors reported by one news source regarding a potential takeover of the company by global biotechnology firm, Genzyme Corporation (GENZ). We observed investors taking a near-term bearish stance on the company by picking up more than 2,100 calls at the May 15 strike price for an average premium of 63 cents per contract. Shares would need to continue upwards by about 15% in order for these options to land in-the-money by expiration. Option implied volatility has spiked as high as 97.5% today up from Friday’s reading of 72%.

TiVo, Inc. (TIVO) – Shares of the provider of technology and services for digital video recorders have rallied by about 1% to $7.70 which is still 1.36 off of the 52-week high for the stock of $9.06 attained back on September 4, 2008. One option trade we observed this morning indicates that one investor is looking for shares to break through the 52-week high by expiration in August. It appears that this individual banked gains on the sale of 5,000 calls at the in-the-money May 7.5 strike price for 72 cents each, and then reestablished a long position at the August 10 strike price where he purchased 10,000 calls for an average premium of 69 cents apiece. Shares would need to experience an additional rally of about 30% in order for the August 10 calls to land in-the-money by expiration. Option implied volatility is up on the stock from Friday’s average reading of 89% to the current value of 95%.

Owens-Illinois, Inc. (OI) – The world’s largest manufacturer of glass containers for various food, beverage, and pharmaceutical products has experienced a share price decline of more than 4.5% to $18.55. The fall in shares seems to run counter to the news that S&P’s Ratings Service has revised its outlook on OI to ‘positive’ from ‘stable’ and reaffirmed the ‘BB’ corporate credit rating on the company. Additionally, with all of the hype surrounding the potentially harmful chemical bisphenol A (BPA), a principal chemical in the manufacture of polycarbonate plastics and epoxy resins, one might have expected consumer’s preference for glass containers to be on the rise. One option trader took a bearish stance on the company, in line with the erosion in share price today. It appears that this investor sold 5,000 calls at the August 22.5 strike price for 1.17 per contract in order to finance the purchase of 5,000 puts at the August 15 strike for 1.20 apiece. The net cost amounts to 3 cents for the trade and yields a breakeven point at $14.97 where profits would amass if shares were to fall below that point by expiration.

Comments

[Freya:]

Thanks for the NVAX update. I've owned them since SARS.

Apr 27 02:01 PM