Options Bulls Continue to Blitz Embattled Biogen Stock
The biotech was downgraded at Piper Jaffray earlier
Biogen Inc (NASDAQ:BIIB) stock is trading down 1.8% at $235.42, after Piper Jaffray downgraded the biotech to "neutral" from "overweight," and lowered its price target to $250 from $280. The brokerage firm is concerned about increasing competition among multiple sclerosis drugs, and says it sees "troubling near- and longer-term trends" for BIIB.
Most analysts are already bearish on Biogen, with 18 of 24 maintaining a "hold" or worse rating on the stock prior to today. Plus, the average 12-month price target of $252.81 is a slim 7% premium to current trading levels.
Options traders, on the other hand, have been unusually optimistic toward BIIB in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 2.43 ranks in the 85th annual percentile, meaning calls have been bought to open over puts at a quicker-than-usual clip.
It's a similar trend today, albeit amid low absolute volume. At last check, 1,530 BIIB calls had been traded, 1.5 times the expected intraday amount, compared to a lower-than-usual 640 puts. Day traders may be buying to open the weekly 6/28 237.50-strike calls for a volume-weighted average price of $0.87, which would make breakeven for the call buyers at tonight's close $238.37 (strike plus premium paid).
Looking at the charts, Biogen stock is currently staring at a nearly 22% year-to-date deficit. The bulk of these losses came in the wake of a late-March bear gap -- sparked by a pair of halted drug trials -- with BIIB stuck churning between $220 and $245 in recent months. The higher-end of this trading range is home to the equity's descending 80-day moving average, too, which contained a breakout attempt earlier this week.
