Schaeffer's Midday Options Update Features Vertex Pharmaceuticals.CINCINNATI -- Today's Schaeffer's Midday Options Update features Vertex Pharmaceuticals Vertex Pharmaceuticals is a biotechnology company with activities spanning the length of the pharmaceutical product pipeline, from target identification through to clinical trials and marketing. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :VTRX). The Midday Options Update contains a brief commentary on the day's most notable activity and a table listing the most-active calls and puts for the day. The Midday Options Update is published every day at www.SchaeffersResearch.com - the home of Bernie Schaeffer and Schaeffer's Investment Research. Take advantage of the timely Schaeffer commentaries by signing up for their free e-newsletters -- Opening View, Market Recap and Monday Morning Outlook. Click here to have the Schaeffer's commentaries delivered to you free via email every day and get entered to win an iPod Nano A flash-based digital music player from Apple, introduced in 2005. Like larger iPod models, the nano has a color screen. Although the nano name suggests ultra-small "nanotechnology," the iPod shuffle is actually smaller. See iPod. . http://www.schaeffersresearch.com/redirect.aspx?CODE=PRMOU13M&PAGE=1. Options Update: Is Vertex Set to Go Vertical? Despite a shortage of economic data compared to last week, the major market indices have found reason to rally as we head into the latter half of the trading session. Traders appear to be bolstered by a fresh influx of merger and acquisition news floating around the Street. Meanwhile, in economic news, wholesaler inventories increased by 0.8 percent to a seasonally adjusted Seasonally adjusted Mathematically adjusted by moderating a macroeconomic indicator (e.g., oil prices/imports) so that relative comparisons can be drawn from month to month all year. $392.92 billion in October as demand fell amid the economy's slowdown. Analysts on Wall Street had expected a 0.5-percent increase. Elsewhere, the National Association of Realtors The National Association of Realtors (NAR) is made up of residential and commercial realtors who are brokers, salespeople, property managers, appraisers, and counselors, and others working in the real estate industry. says the pace of existing home sales Existing Home Sales An economic indicator of both the number and prices of existing single family houses, condos and co-op sales over a one-month period. Released monthly by the U.S. is expected to rise steadily in 2007 and reach 6.40 million, 1.0 percent lower than this year. On the flip-side, new home sales New Home Sales An economic indicator that measures sales of newly built homes. Released by the U.S. Department of Commerce's Census Bureau, it includes both quantity and price statistics. are projected to remain fairly depressed into next year. Most-Active Options Update At 1:21 p.m. Eastern Time, the Dow Jones Industrial Average Dow Jones Industrial Average The best known U.S. index of stocks. A price-weighted average of 30 actively traded blue-chip stocks, primarily industrials including stocks that trade on the New York Stock Exchange. (DJIA DJIA See Dow Jones Industrial Averager (DJIA). - 12,333.0) has added 25.5 points, while the S&P 500 Index (SPX (Sequenced Packet EXchange) The transport layer protocol in the NetWare operating system. Similar to the TCP layer in TCP/IP, it ensures that the entire message arrives intact. SPX uses NetWare's IPX as its delivery mechanism. - 1,413.65) has jumped 3.81 points. The Nasdaq Composite The Nasdaq Composite is a stock market index of all of the common stocks and similar securities (e.g. ADRs, tracking stocks, limited partnership interests) listed on the NASDAQ stock market, meaning that it has over 3,000 components. It is highly followed in the U.S. (COMP - 2,448.6) has risen 11.2 points. At 1:22 p.m. Eastern Time, 2,549,123 calls have changed hands compared to 1,787,569 puts, equaling a single-day put/call volume ratio of 0.70. The CBOE's equity put/call volume ratio stands at 0.68, while the ISE's ratio weighs in at 0.67. Vertex Pharmaceuticals It's a rather bizarre day for Vertex Pharmaceuticals (NASDAQ:VRTX An earlier real time operating system for embedded systems from Mentor Graphics, Wilsonville, OR (www.mentor.com). VRTX was the progenitor of the VxWorks OS from Wind River and was superseded by Nucleus OS. VRTX - Virtual Real-Time Executive. ). The company announced this morning that its jointly developed (with Merck) anti-cancer drug MK-0457 showed clinical activity in patients in a Phase I study. Subsequently, the firm is advancing the drug into Phase II trials. What's more, NASDAQ announced today that it is adding the stock to the Nasdaq 100 Index Nasdaq 100 Index A market-capitalization-weighted index of the largest and most active nonfinancial domestic and international issues listed on the Nasdaq Stock Market. (NDX NDX Index NDX Index (File Name Extension) NDX Northern Document Exchange NDX Index File ). Despite this seemingly good news, shares of VRTX were last seen lower by more than six percent. The stock's decline has halted, however, with the equity finding solid support at the round-number 40 level. The security vaulted above this region in late October, and now appears to be buoyed by the lower rail of this gap higher. Reinforcing the technical support is the stock's rising 50-day trendline. With the shares in turmoil today, it should come as no surprise that the equity has made our list of most-active options today. Specifically, some heavy put activity at VTRX's December 40 strike looks particularly interesting, since the equity is attempting to rebound off support in this region today. More than 10,000 puts have changed hands at this front-month strike so far today, with open interest resting at 11,025 contracts. Making the situation even more interesting is that a block of 5,000 contracts crossed the tape at 9:46 a.m., changing hands at the bid price of $1.10 per option, or $110 per contract. The block was marked "spread" and appeared to be tied to a similar block of 5,000 call contracts that traded at the ask price of $1.40 per option, or $140 per contract, on the stock's January 50 strike. Since there are too many possibilities for what the trader was thinking should these trades be related, I'll let you speculate on this activity while I move on to the rest of VRTX's outlook. Sticking with our options theme, VRTX's Schaeffer's put/call open interest ratio (SOIR SOIR Schaeffer's Put/Call Open Interest Ratio SOIR Simultaneous Operations on Intersecting Runways ) of 1.48 indicates that put activity is nothing new for the pharmaceutical firm, as puts easily outnumber calls in the front three months of options. Furthermore, this ratio ranks above 77 percent of those taken during the past year, indicating a near-extreme degree of pessimism from the speculative crowd. Elsewhere in VRTX's sentiment backdrop, short sellers are betting heavily against the shares. Currently, more than six percent of the stock's total float is sold short. With today's decline, these pessimistic investors are certainly not rushing for the exits, but there could be a little bit of profit taking, which could help to stem VRTX's decline. Wall Street is the only bullish group among our indicators for VRTX. According to Zacks, 11 of the 18 analysts covering the shares rate them a "buy" or better, with nary nar·y adj. Not one: "Frequently, measures of major import . . . glide through these chambers with nary a whisper of debate" George B. Merry. a "sell" to be found. This activity doesn't surprise me, as the brokerage bunch has been notoriously bullish on pharmaceuticals recently. However, this configuration still raises the risk of downgrades should sentiment shift among brokerage firms. All in all, with the heavy pessimism traders and solid technical support, I would look for a rebound in the shares during the next week or so. The key to this bullish outlook is support at the 40 level and VRTX's rising 50-day moving average. Should this tandem of support give way, lookout to the downside. Otherwise, VRTX should reclaim its recent highs in short order. As always, thank you very much for reading and good luck with your trading! Click here to see a Daily chart of VRTX since September 2006 with 50-day moving average: http://www.schaeffersresearch.com/wire?ID=17852. The best way to take advantage of the timely Schaeffer commentaries is to sign up to receive their free e-newsletters -- Opening View, Market Recap and Monday Morning Outlook. Click here to have the Schaeffer's commentaries delivered to you free via email every day and get entered to win an iPod Nano. http://www.schaeffersresearch.com/redirect.aspx?CODE=PRMOU13M&PAGE=1. About Schaeffer's Investment Research (www.SchaeffersResearch.com) Schaeffer's Investment Research, founded by Bernie Schaeffer in 1981, is a financial information and trading resources company. It publishes Bernie Schaeffer's Option Advisor, the nation's leading options subscription newsletter. The firm's contrarian approach focuses on stocks with technical and fundamental trends that run counter to investor expectations. The firm's website, http://www.SchaeffersResearch.com, is recognized as one of the leading information sources for stock and options traders and was cited as the top options website by both Forbes and Barron's. Click here for more details about Schaeffer's trading methodology: http://www.SchaeffersResearch.com/method. |
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