Whether it is mergers, earnings, or just plain vanilla hedging, it seems there is quite a bit of unusual activity in options trading. We have seen this in many key stocks in the BioHealth arena from drug to biotech shares.
King Pharmaceuticals, Inc. (NYSE: KG) has a couple of key events to watch for this week. King has earnings due on Thursday morning (Aug. 6). But there is also some unconfirmed buyout talk out there. We were doing our normal screens this morning, and Joe Kunkle of OptionsHawk.com pointed out to us some very unusual options activity in the stock. Kunkle noted some possible interest from Abbott Labs (NYSE: ABT) in the company. Oddly enough, as of almost Noon EST we now have almost doubled that activity in August Call Options at the $10.00 Strike Price. That volume now stands at 7,200 contracts versus a prior open interest of 2,789. We would note today that since it has just set earnings on such short notice that these could just as easily be option bets around the earnings since those options do not expire until August 21.
Also seen this morning was unusual options activity in Wyeth (NYSE: WYE). While this was large enough to flag a highly unusual options alert, it may have been nothing more than a close-out or reversal of a bet on the price in the Pfizer Inc. (NYSE: PFE) merger.
Over the weekend, we noted at 247wallst.com Genzyme Corporation (Nasdaq: GENZ) saw a huge amount of trading in the AUGUST $50.00 PUTS, where more than its entire open interest traded, and share were at risk of hitting 52-week lows. Those levels look to have been hit this morning when shares hit $49.62. They have since come back to $50.00. Interestingly enough, the options bets have dried up in Genzyme. This remains one of the most key biotech issues to watch for the weeks ahead after the FDA issues have taken out so much value measured in market cap. This is down 10% in just the last three sessions.
Human Genome Sciences, Inc. (NASDAQ: HGSI) is also showing some unusual options trading, although this is easy to explain. It has raised cash and has made a huge run higher. We do not consider this to be a fortune telling event that has promise of a repeat based only on options trading. But here is a snapshot of that volume as of 12:00 PM EST for the AUGUST-2009 CALLS:
Strike. Volume Op. Int.
$12.50.. 1,356 8,560
$14.00.. 1,775 2,259
$15.00.. 2,864 11,418
$16.00.. 2,623 2,096
$17.50.. 4,119 6,843
Stay tuned, we are just about to release our next round of potential merger candidates in Biotech and Drug shares…..
JON C. OGG
AUGUST 4, 2009
