Making a move before earnings
- MLYS put volume heavy two days before earnings
- Stock in pullback, but still up 139% since Aug. 29
Plenty of stocks were in the red on Thursday, and while the focus was mainly on the pullback in AI-centric tech names, one of the more interesting developments may have unfolded in a biotech stock that has staged one of the market’s more impressive rallies in recent months.
By mid-morning, shares of biotech Mineralys Therapeutics (MLYS) were down roughly 6% on the day, and roughly 16% below their October 20 record close of $44.16. But this correction was preceded by a seven-week, 185% rally that kicked off with an 86% surge on September 2 when the company announced a successful round of funding:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
Despite the stock’s retrenchment over the past couple of weeks, as of Thursday shares were still 139% higher than they were on August 29.
However, the options market may have been telling a more compelling story. In early trading, MLYS had the market’s highest put-call ratio, with more than 800 puts trading for every call, and put volume more than 42 times average overall. What may have made this even more noteworthy was that it occurred just two days before the company’s Monday earnings call.
Also, almost all of the volume was in matching 4,000-contract trades in the November $35 and $25 puts:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
Because these options expire in two weeks, we know they don’t have longer-term implications. And because they are matching trades, there’s a chance they represent a bear put spread—meaning, a large trader may have bought the $35 calls and simultaneously sold the $25 calls. This position suggests expectations for a near-term down move—specifically, the potential to profit (at expiration) if the stock is trading between the two strike prices, with the maximum profit reached if it closes at the lower (short) strike.
It's not the only viable interpretation of yesterday’s activity, but it will be one worth watching when the company releases earnings on Monday.
Today’s numbers include (all times ET): consumer sentiment (10 a.m.).
Today’s earnings include: Wendy’s (WEN), Constellation Energy (CEG).
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