Hogg,
Concerning your question and statement about LGND and the option activity on Friday, this is what B. Shaeffer has to say about the activity..
Ligand Pharmaceuticals
Ligand Pharmaceuticals (NASDAQ:LGND) is a biotherapeutic and biopharmaceutical concern that specializes in what Hoover's describes as "small-molecule drugs that interact with hormone-activated intracellular receptors."
On August 3, the stock dropped almost 40 percent after steeply missing analysts' earnings expectations for the second quarter and announcing the surprise departure of its independent auditor. Since this one-day drubbing, LGND shares have failed to recover, struggling to break through the glass ceiling into double-digit territory. This week, the stock declined below potential double-bottom support in the 9.5 region to reach a new four-month low.
There are signs of skepticism brewing on LGND, but this is not a surprise given the security's poor price action. As such, the contrarian implications are not as strong as they might be if pessimism was prevalent on an outperforming issue.
For example, Schaeffer's put/call open interest ratio (SOIR) for LGND weighs in at 0.42, which is higher than 84 percent of all of the past year's worth of SOIR readings. This reading could experience a decline come Monday morning, however, as both out-of-the-money May 12.50 and May 17.50 calls have seen notable activity cross the tape in today's session. The May 12.50 call has seen more than 10,000 contracts trade on open interest of nearly 19,000 contracts, while the 17.50 strike has seen almost 25,000 contracts cross the tape on open interest of only 6,899 contracts. Popular theory would suggest that many of these would translate as new open interest on Monday.
Skepticism is also rearing its head among the short-selling community. Last month, the number of shorted LGND shares rose 27 percent to its highest reading since July 2003, representing 16.7 percent of the equity's float. What's more, the current short-interest ratio on LGND stands at 8.9 days to cover. But remember that for a short-covering rally to ensue, the stock must give the bears a reason to wish for an exit.
Click on the following link to see the Daily Chart of LGND since December 2004 With 10-Day and 20-Day Moving Averages: schaeffersresearch.com. |
