Low volatility expectations are being priced into short-term VRTX options
Drug concern Vertex Pharmaceuticals, Inc. (NASDAQ:VRTX) has been trading sideways over the past 12 months. However, notable upside may be in the stock's near future, considering VRTX has been one of the best stocks to own in the third quarter, looking back over the last decade.
According to Schaeffer's Senior Quantitative Analyst Rocky White, the equity has averaged a gain of 20% in the third quarter during the past 10 years -- the highest of all S&P 500 Index (SPX) stocks --- and boasts a 90% win rate in the July-September period. Based on its current perch, another move of this magnitude would put the shares near $201, a fresh record high for the stock.
At last check, VRTX is down down 1.4% at $167.50. Longer term, the stock has been churning between $140 -- just above its pre-bull gap levels from last July -- and its mid-March peak of $178.25. Last week, Vertex stock bounced off its 320-day moving average to gap near the higher end of this range, after rival Galapagos (GLPG) reported disappointing data for its cystic fibrosis (CF) treatment.
Those wanting to bet on more third-quarter upside for VRTX stock may want to consider doing so with options. The security's Schaeffer's Volatility Index (SVI) of 33% ranks in the 27th percentile of its annual range, meaning short-term options are pricing in relatively low volatility expectations at the moment.