The shares are flirting with multi-year highs, yet options remain attractive
Biotech name Heron Therapeutics Inc (NASDAQ:HRTX) once again appeared on Schaeffer's Senior Quantitative Analyst Rocky White's list of stocks that are currently trading near a 52-week high, but also sport a low Schaeffer's Volatility Index (SVI). This combination of stellar price action and relatively inexpensive short-term options could be signaling more tailwinds ahead for the surging drug stock.
Although absolute volume is low, calls are universally popular for HRTX, which sports a 10-day call/put volume ratio of 9.11 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This reading shows that calls have outnumbered puts by a nearly 9-to-1 ratio in the past two weeks.
Furthermore, Heron Therapeutics stock currently sports an SVI of 57%, ranking in the 14th percentile of its annual range. This low reading suggests that near-term options are pricing in relatively low volatility expectations at the moment.
Since 2008, there have been just two other times HRTX stock was flirting with a new high and had an SVI in the bottom 20% of its annual range. After those instances, the shares went on to gain 9.5%, on average, over the next month. A similar pop from current levels would place the equity back above near multi-year highs.
Looking closer, HRTX shares have rapidly climbed since mid-December, with pullbacks contained by their 60-day moving average. The stock, which has doubled in the past year, touched a three-year high of $32.70 on March 19, but was last seen trading 0.5% lower at $30.50.
Despite this positive price action lately, short sellers have been flocking to the drug stock. Short interest increased by 19% in the two most recent reporting periods to 9.36 million shares, the highest point since early December. This represents more than 21% of HRTX's total available float, and nearly seven days of pent-up buying demand, at the security's average daily trading volume. Should HRTX keep climbing, a short squeeze could be in play.