What Happened: Novavax Inc (NASDAQ: NVAX) closed up strongly on the day, just under 8%, as the Philippine government gave emergency use authorization for their COVID-19 vaccine.
Trading volumes have been solid with over 5 million shares traded on the day versus the 4.5 million 10-day average.
Meanwhile, option traders have been very active in the stock, trading over 49,000 options on the day (image below).
SEE ALSO: Why Novavax Shares Are Rising
Why It Matters: Prior to Wednesday, Novavax had a total of 338,000 options with 185,000 of them being calls and 153,000 puts. Hence, today’s option activity alone represents a 14% increase in the total options.
Looking at the image above, with roughly 38,000 of them being calls and 10,000 puts, this translates to 77 out of every 100 options being calls. This suggests option traders have a strong bullish bias on the stock from the news.
What’s Next: Of the 49,000+ options traded today, approximately 15,000 of them are short-dated (expiring Friday) with the rest of the volume spread out between now and the Jan. 21 expiry of next year.
This lack of concentration in one expiry suggests option traders don’t have a specific date they think the stock will see a significant price adjustment. It merely suggests they’re leaning bullish over the next several months.
Prior to Wednesday, 27% of the options were set to expire (~91,000) which could definitely create a headwind for the stock towards the $200 strike. But beyond this, the largest buildup of positions is in the Dec. 17 expiry with the largest strikes by open interest being the $200, $220 and $240 strikes (image below).
Between the three strikes listed above, the volume came in strong around the $240 strike. This suggests, for now, the best bull case option traders have in mind for the Dec. 17 expiry is a push towards $240.
If the stock fails to hold onto this bullish momentum, solid open interest comes in around the $160 and $165 strikes.
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