It would be an understatement to say that Moderna has had a wild week.
A day after Monday’s 20% surge on positive clinical trials of a potential coronavirus vaccine, a report from STAT News sent the stock 10% in the opposite direction. Now, after Wednesday’s rebound, the stock is down 10% and tracking for its third double-digit move of the week.
That’s bad news for one group of options traders, who will need this biotech stock to make a miraculous recovery before Friday’s close.
“Moderna, on the back of all this activity, is seeing some highly elevated options volumes. Today we actually saw more than two times the 20-day average call volume, and the 20-day average is, itself, an order of magnitude higher than what we had seen at any point prior to the Covid-19 pandemic,” Optimize Advisors President Michael Khouw said Wednesday on CNBC’s “Fast Money.”
Many options traders are flooding into biotech as the race heats up between companies to develop the first coronavirus vaccine or treatment, and since volatility in the space is elevated, they aren’t bothering to make small bets.
“Most of the short-dated activity we were seeing was in the weekly 75 and 80-strike calls. The buyers of the 75-calls were paying about $1.45,” said Khouw.
Those calls break even at an underlying stock price of $76.45, or about 6% higher from where Moderna was trading at the time in Wednesday’s session, but as Khouw would point out, those contracts actually got more expensive later in the day as Moderna’s stock gained steam into the close.
Khouw also warned, however, that plenty of big-money players weren’t hesitating to make bearish bets on the name.
“If you take a look out to the longer-dated options out to January, and so on, we did see some [institutional traders] buying puts spending over $1 million there. So, obviously, the options market is betting on considerable volatility going forward,” said Khouw.
That considerable volatility was on full display during Thursday’s session, with Moderna trading more than 8% lower.