Micro-cap diagnostics company Exact Sciences ripped higher on a
recommendation from Jefferies, and option traders looked to earn
Our tracking systems detected the sale of 2,575 October 5 puts
for $0.30 and 1,500 January 5 puts for $1. Volume was more than 7
times open interest in both strikes.
There was also selling in the October 5 and January 7.50
EXAS surged 9.25 percent to $5.52 yesterday and at one point
traded up as much as 17 percent. The rally came after Jefferies
upgraded the stock to buy on the expectation its non-invasive test
for colorectal cancer will have positive test results.
The company plans to issue clinical data at the American
Association of Cancer Research meeting on Oct. 29.
As is typical before such key events, implied volatility is
extremely high in EXAS at about 112 percent. That's twice as much
as the stock has moved over the last 50 days, according to
Selling options is a common strategy used to bet that implied
volatility is too high and has the advantage of letting the
investor collect premium from the shares simply holding their
ground, instead of requiring that they rise or fall a certain
amount. Avanir Pharmaceuticals, which is expecting a big ruling
from the Food and Drug Administration next month, also saw heavy
volatility selling last week.
Overall option volume in EXAS was 23 times greater than average
in yesterday's session.
(Chart courtesy of tradeMONSTER)
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