Working the Human Genome Sciences Magic (HGSI)
Human Genome Sciences, Inc. (NASDAQ: HGSI) has been soaring today and the stock hit new 52-week highs. As of 2:45 PM EST we Human Genome Sciences had already crossed a full day’s trading volume at 120% normal stock trading volume. The culprit for today’s significant strength s of course the JPMorgan upgrade to Overweight from Neutral. But the catalyst for the upgrade is ahead of new additional clinical data being presented on its Benlysta experimental lupus drug next week.
We also noted how and that options were picking up throughout the day. Our friend over at OptionsHawk.com just sent us more details on the options trading:
Human Genome (HGSI) is trading 84,000 calls and 21,000 puts on the day after an upgrade at JP Morgan before the key November 2nd Benlysta second of two Phase 3 trial data for the treatment of Lupus, which would make it the leading contender in the market for a highly lucrative potential market. Smart money has been bullish the name in recent weeks with 10,000 contract November $25/$30 call spreads and various other strategies as the common consensus is a 70% chance of the drug having a positive outcome. Despite implied volatility being at 193%, many are still betting on volatility expecting a sharper than priced in reaction. Today’s action represents 4X the average call volume, although only 1/4th of the action is offer side buying, but ISE Sentiment indicates 3 calls are being opened for every 1 put. One of the larger trades today is slightly bullish but bearish on volatility as the trader used a butterfly call spread, buying 3,500 of the November $20 and $30 calls, and selling 7,000 of the $25 calls, expecting shares to trade around the $25 level and for Implied Volatility to be crushed. -OptionsHawk.com
The reason that Human Genome is such a battleground stock is because the lupus drug is a new entrant in an old field that has had very limited new development in years. This also has blockbuster drug written all over it if it approved. The October 15 settlement date for short interest has the short interest listed as 17,967,328 shares. That is actually the fifth consecutive short interest drop, meaning that traders are lightening up on trying to bet against the stock since at least mid-August.
With an hour left for trading, Human Genome Sciences is up almost 14% at $20.49, and that is after hitting an intra-day high (and yearly high) of $20.62.
JON C. OGG
