Tuesday, July 17, 2012

Affymax (AFFY) - Biotech Pops 42%, Earnings Approach, But Vol is... Depressed?

AFFY is trading $16.96, up 3.5% with IV30™ down 4.6%. The LIVEVOL® Pro Summary is below.


Click for Free Trial


Affymax, Inc. is a biopharmaceutical company engaged in developing drugs to improve the treatment of serious and often life-threatening conditions. Its product candidate, peginesatide, is for the treatment of anemia in chronic kidney disease patients on dialysis.

This is a vol note on a bio-tech that's been rallying of late with earnings due out in Aug... oddly, I'm noting depressed vol.

Let's start with the Charts Tab (six months), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

Check out the recent run on the stock side, where the price has risen from $11.95 to $16.96 or up 42% in just four trading days. Here's the news that appears to be driving AFFY, which has breached another 52 wk high, today:

Since Omontys' approval was already priced into Affymax's soaring stock price, its big move last week came on news that a major dialysis-focused medical provider would begin using the drug in its facilities. That should juice earnings going forward, as Omontys' biggest X factor is its ability to compete with Amgen's (Nasdaq: AMGN) market-leading anemia drugs, Aranesp and Epogen.

Source: The Motley Fool via Yahoo! Finance; Can This Biotech Stock Keep Booming?, written by Alex Planes.

I'm OK with that reasoning behind the stock rise, but then why has it been in steps? Here are the closing prices over the last five trading days (using the snapshot today as my artificial close).

7-11-2012: $11.95
7-12-2012: $14.24
7-13-2012: $16.49
7-16-2012: $16.39
7-17-2012: $16.96

Turning to the vol, we can see how elevated the implied was in late Mar (FDA approval "stuff"). As of right now, however, the vol is actually quite low relative to the past. I've included an annual chart, below, with the same legend.

Looking at this longer time horizon, we can see how elevated the vol was in mid November -- incredible really, and quite common to small cap bio-techs. The 52 wk range in IV30™ is [54.74%, 291.71%], putting the current level in the 5th percentile. Obviously, that percentile number is a little misleading given the prior news, but then again the stock moved 35.7% in early Dec off of that vol event, then 4.2% in late Mar, and now has moved more than 40%. Again, it's that trail upwards (rather than gapping) that has been... attention grabbing.  And earnings are around the corner...

Let's turn to the Skew Tab.

I've excluded Jul since there really aren't very many options to chart (we only chart options with a bid). We can see that Aug lies on top of Oct -- there's likely an earnings event in the Aug cycle. That kooky spike in the Oct skew is in fact simply reflective of very wide markets (we use mid-market as the theo in LVP; more granular theos are allowed in LVX™ (Livevol Execution)). If you want to get a sneak peak at LVX (and opening a brokerage account), please e-mail support@livevol.com with EXACTLY the following:

Body: First Name, Last Name

Finally, let's turn to the Options Tab, for completeness.

Across the top we can see that the Aug vol is priced to 68.71% -- again, it feels kinda low given the recent stock movement and that earnings are due out (I think), no?...

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

This is trade analysis, not a recommendation.

Legal Stuff:

No comments:

Post a Comment