Questcor Pharmaceuticals Inc
) has had an impressive run on the charts in 2013, with its shares
up more than 120%. However, since topping out at a record peak of
$74.76 in late August, QCOR has been in a rut, down about 21%. Not
surprisingly, investors have been increasing their bearish presence
in QCOR's options pits, as they bet on a further decline, or
protect their portfolios against one.
During the past 10 sessions at the International Securities
Exchange (ISE), Chicago Board Options Exchange (
), and NASDAQ OMX PHLX (PHLX), speculators have bought to open
13,842 puts on QCOR, compared to 4,075 calls, resulting in a
put/call volume ratio of 3.40. As a point of reference, this ratio
stood at a call-skewed 0.61 one month ago. What's more, the current
ratio ranks higher than all other similar readings taken in the
past year, meaning traders are initiating long puts over calls at
an annual-high clip.
In the front-month series, speculators have paid particular
October 40 and 50 puts
, where the majority of the 1,191 and 3,291 contracts that
respectively reside here have been bought to open. Given QCOR's
withstanding technical prowess -- and the deep out-of-the-money
status of each put -- a portion of this activity could simply
purchasing some options-related insurance
against a continued downtrend.
If this is the case, the investors were willing to pay a pretty
penny for their hedges. Implied volatility at each strike is
inflated relative to the security's 20-day historical (realized)
volatility (113% at the 40 strike, 86% at the 50 strike vs. 52.4%).
In other words, premium is rather expensive, comparatively
Outside of the options pits, sentiment paints more of a mixed
backdrop. Short interest edged higher during the latest reporting
period, and now accounts for 18.2% of the stock's available float.
In fact, it would take more than eight sessions to cover these
shorted shares, at QCOR's average pace of trading.
However, the brokerage bunch has remained upbeat toward QCOR,
despite its recent consolidation. Not one of the analysts covering
the stock believe the security to be anything less than a "strong
buy." Plus, the consensus 12-month price target of $76.70 not only
reflects expected upside of 29.7% to the stock's current perch at
$59.15, but also uncharted territory. Should the stock continue to
struggle, a round of downgrades and/or price-target cuts could
apply contrarian pressure to Questcor.
This article by
was originally published on
Schaeffer's Investment Research
Below, find some more great content from Schaeffer's Investment
Daily Game Plan - Pure Dysfunction
The Government Is Shutdown. Now What Do You
Analyst Upgrades: Micron Technology, Inc. (
), VMware, Inc. (
), and Canadian Solar