Both equities sport attractively priced options at the moment
This morning, Goldman Sachs weighed in on two pharma stocks, downgrading Clovis Oncology Inc (NASDAQ:CLVS) and Esperion Therapeutics Inc (NASDAQ:ESPR) to "sell." Regarding the former, Goldman believes expectations for Clovis' cancer drug Rubraca are inflated. And with the latter, the analyst in coverage expressed concern over Esperion's lack of clinical or commercial catalysts, and expects the stock to be "range bound" for the next 10 months.
At last check, Clovis stock was down 5.5% to trade at $15.20. Since brushing up to the $30 level in late February, CLVS has given back half its value, thanks in part to news of a halted cancer drug study in mid-April, guided lower by its descending 20-day moving average. Barring a dramatic pivot higher, the security is heading toward its third straight weekly loss.
Today's bear note goes against the grain, as six out of eight analysts in coverage rate the stock a "strong buy." Plus, the average 12-month price target for CLVS sits all the way up at $30.
Elsewhere, short sellers have been hitting the exits, with short interest down 10.4% in the two most recent reporting periods to 8.11 million shares, the lowest in nearly a year. Nevertheless, this still takes up a healthy 16% of CLVS' total available float.
Options look to be an ideal vehicle to bet on the equity at the moment, with its Schaeffer's Volatility Index (SVI) of 71% ranking in the 18th percentile of its annual range. This indicates short-term options are currently pricing in relatively low volatility expectations -- a boon to potential premium buyers.
Looking at Esperion, the stock is currently down 3% to trade at $50.31, but has bounced off its session low at $47.87. Today's pullback has also found support at ESPR's 320-day moving average, a trendline that served as resistance earlier in the year. The stock's weekly winning streak of three is in jeopardy, though it's still boasting an impressive 17% monthly gain on the heels of a regulatory win for the company's cholesterol drug.
In the options pits, there's a stronger-than-usual affinity for long calls over puts of late, albeit amid light absolute volume. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 843 ESPR calls were bought to open in the past two weeks, compared to just 23 puts. The resultant call/put volume ratio of 36.65 ranks 4 percentage points from an annual high.
Similar to its sector peer, ESPR's SVI is ranked in the bottom end of its annual range, signaling short-term options are relatively cheap at the moment. Specifically, the stock's SVI of 51% arrives below 95% of comparable readings taken in the past year.