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The put/call ratio, or the ratio of open interest put options to call options, is a very telling indicator of the option market’s sentiment on a stock. The higher the put/call, the more options traders that believe the stock is headed lower. When a stock sees a significant decrease in put/call over time, it indicates a more bullish outlook.

We ran a screen on the biotech industry for stocks seeing significant decreases in put/call over the last ten trading days, indicating a bullish change in outlook.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.‬

We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.


(Click to enlarge)

Do you agree with options traders’ bullishness on these names? Use this list as a starting-off point for your own analysis.

List sorted by decrease in put/call.

1. Incyte Corporation (NASDAQ:INCY): Focuses on the discovery and development of proprietary small molecule drugs for hematologic and oncology indications, and inflammatory and autoimmune diseases. Market cap of $1.59B. Put/Call ratio changed from 0.86 to 0.22 between 10/31/11 and 11/14/11, a change of -74.42%. This is a risky stock that is significantly more volatile than the overall market (beta = 2.23). The stock is a short squeeze candidate, with a short float at 12.06% (equivalent to 9.56 days of average volume). It's been a rough couple of days for the stock, losing 6.53% over the last week.

2. Theravance Inc. (NASDAQ:THRX): Engages in the discovery, development, and commercialization of small molecule medicines for various therapeutic areas, including respiratory disease, bacterial infections, and central nervous system (NYSE:CNS)/pain. Market cap of $1.99B. Put/Call ratio changed from 0.60 to 0.18 between 10/31/11 and 11/14/11, a change of -70%. The stock is a short squeeze candidate, with a short float at 10.29% (equivalent to 17.85 days of average volume). The stock has had a good month, gaining 12.93%.

3. Affymax, Inc. (OTCQB:AFFY): Engages in the development of drugs for the treatment of serious and life-threatening conditions. Market cap of $164.0M. Put/Call ratio changed from 0.68 to 0.26 between 10/31/11 and 11/14/11, a change of -61.76%. The stock is a short squeeze candidate, with a short float at 7.59% (equivalent to 6.06 days of average volume). The stock has lost 10.18% over the last year.

4. BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX): Designs, optimizes, and develops small-molecule pharmaceuticals that block key enzymes involved in infectious diseases, cancer, and inflammatory diseases. Market cap of $133.82M. Put/Call ratio changed from 0.02 to 0.01 between 10/31/11 and 11/14/11, a change of -50%. This is a risky stock that is significantly more volatile than the overall market (beta = 2.2). The stock is a short squeeze candidate, with a short float at 10.2% (equivalent to 19.75 days of average volume). The stock has had a good month, gaining 13.85%.

5. Sequenom Inc. (NASDAQ:SQNM): Provides products, services, diagnostic testing, applications, and genetic analysis products that translate the results of genomic science into solutions for biomedical research, translational research, molecular medicine applications, and agricultural and livestock research. Market cap of $424.18M. Put/Call ratio changed from 0.16 to 0.12 between 10/31/11 and 11/14/11, a change of -25%. The stock is a short squeeze candidate, with a short float at 20.9% (equivalent to 9.55 days of average volume). The stock has performed poorly over the last month, losing 23.2%.

6. Halozyme Therapeutics, Inc. (NASDAQ:HALO): Engages in the development and commercialization of recombinant human enzymes that transiently modify tissue under the skin to facilitate injection of other therapies or correct diseased tissue structures for clinical benefits. Market cap of $847.61M. Put/Call ratio changed from 0.26 to 0.21 between 10/31/11 and 11/14/11, a change of -19.23%. The stock is a short squeeze candidate, with a short float at 6.37% (equivalent to 8.3 days of average volume). It's been a rough couple of days for the stock, losing 7.05% over the last week. The stock has had a good month, gaining 31.94%.

*Options data sourced from Schaeffer’s, all other data sourced from Finviz.

Source: 6 Biotech Stocks With Bullish Options Sentiment