Options Activity for Amgen, Inc. (AMGN) and Human Genome Sciences (HGSI).
Thursday, October 14, 2010
I hope that your trading is going well, as I know that members of S.O.M.E. are making the most of the market movements and their returns.
Today's newsletter includes a look at Biotech stocks, which were popular in the options pits on Wednesday, as traders placed a new batch of bets on sector peers Amgen, Inc. (AMGN) and Human Genome Sciences (HGSI). However, the duo attracted very different types of speculators -- call players flocked to AMGN, while HGSI continued to rack up heavy put volume.
The purpose of this newsletter is to focus on stocks seeing heavy options trading and gives you a unique insight into each stock's sentiment backdrop.
Amgen, Inc. (AMGN)
AMGN was the target of call players on Wednesday, with bullishly oriented option volume rising to twice the expected level. About 25,000 calls traded during the course of the session, compared to just 9,164 puts.
On the International Securities Exchange (ISE) alone, speculators on Wednesday bought to open 4,729 calls on AMGN, along with just 237 puts. The security's single-day ISE call/put volume ratio arrived at 19.95, as nearly 20 times more calls than puts were purchased.
The day's upbeat option activity was part of a growing trend for AMGN, which has racked up a 10-day ISE call/put volume ratio of 9.14. This ratio ranks higher than 99.6% of other such readings taken during the previous year, marking a near-peak of bullishly biased option volume on the exchange.
In the same vein, AMGN's put/call open interest ratio (SOIR) stands at 0.52, with calls nearly doubling puts among options set to expire within three months. This ratio is lower than 94% of comparable readings taken during the previous year, suggesting that short-term options traders have been more optimistically aligned only 6% of the time.
Meanwhile, short sellers have made themselves scarce. Short interest on AMGN deflated by 3.1% during the most recent reporting period, and now accounts for just 1.9% of the equity's float.
On the charts, AMGN has been relatively stagnant in 2010, shedding 1.9% year-to-date. The stock has recently established a foothold above support at its rising 50-day moving average, but resistance in the $57 neighborhood continues to keep AMGN under pressure. This chart region has acted as a troublesome technical ceiling since early May.
Human Genome Sciences (HGSI)
HGSI was pummeled by put players on Wednesday, according to data from the ISE. During the course of the session, traders on this exchange bought to open 5,144 puts on HGSI, compared to just 796 calls. The security's single-day ISE put/call volume ratio of 6.46 confirms that bearish bets were the options of choice.
However, this skeptically skewed option volume is nothing new for HGSI. The equity sports a 10-day ISE put/call volume ratio of 1.76, with puts bought to open nearly doubling calls during this time frame. This ratio ranks in the 99th annual percentile, just one percentage point from a pessimistic peak.
The equity's middling SOIR suggests that there's still room for negative sentiment to grow among short-term speculators. The current ratio of 0.66 rests in the 45th annual percentile, indicating that bearish sentiment has yet to reach fever pitch among speculative investors.
Elsewhere on Wall Street, shorts maintain a sizable stake in HGSI. Despite a 2.6% decline during the most recent reporting period, short interest still represents a healthy 5.7% of the stock's float.
Meanwhile, analysts are firmly bullish on the biotech issue. Zacks reports 14 "buy" or better ratings, compared to just one "hold" and zero "sells."
Considering HGSI's lackluster price action of late, the stock could be pressured lower if traders continue to migrate to the bearish bandwagon. The shares have shed 10.5% year-to-date, and HGSI recently tumbled beneath its 200-day moving average. If this trendline resumes its previous role as staunch resistance, it could draw more opportunistic bears to the stock.
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