Options Brief: Genzyme (GENZ)

GENZ – Genzyme Corporation – Shares of the global biotechnology company rallied as much as 9.3% this morning to an intraday high of $54.49 on reports Sanofi-Aventis SA, France’s largest drugmaker, is getting ready to initiate a major $20 billion acquisition in the United States. Genzyme’s shares tapered off slightly by midday and currently stand 5.2% higher on the day at $52.41 as of 11:40 am (ET). Other biotech and pharmaceutical companies, such as Allergan Inc. and Biogen Idec Inc., experienced sharp upward shifts in share price as well as in options implied volatility following the news. Investors hoping Genzyme, the largest maker of drugs for rare genetic diseases, is the acquisition target purchased out-of-the-money call options on the stock. Call buyers are betting Genzyme’s shares will shoot higher if the firm turns out to be the apple of the French drugmaker’s eye. Traders picked up approximately 1,400 calls at the August $55 strike for an average premium of $1.59 apiece. Investors long the August $55 strike calls make money if Genzyme’s shares rally 8.00% over the current price of $52.41 to trade above the average breakeven price of $56.59 by August expiration day. Bulls also purchased 1,100 calls at the August $60 strike for an average premium of $0.63 per contract. Profits are available to August $60 strike call coveters if the biotechnology firm’s shares jump 15.7% to exceed $60.63 by expiration. Finally, options investors paid an average of $0.44 per contract to take hold of 1,200 calls at the higher August $62.5 strike. Individuals long the higher-strike calls profit if GENZ share price surges 20% over the current price of $52.41 to trade above the average breakeven point at $62.94 ahead of expiration day in August. The surge in demand for Genzyme’s call options coupled with uncertainty regarding which company will be acquired sent the overall reading of options implied volatility on the stock up 27.1% to 41.16% as of 11:55 am (ET).

About Andrew Wilkinson 1023 Articles

Affiliation: Interactive Brokers

Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.

Interactive Brokers: Interactive Brokers offers direct market access to around 80 electronic global markets from a single account. Successful traders and investors understand that superior technology and lower trading costs can result in greater returns. For 32 years we have been building direct access trading technology that delivers real advantages to professionals worldwide. With consolidated equity capital of US $4.4 billion, IB and its affiliates exceed 1,000,000 trades per day. In addition, our prudent and conservative risk policies make Interactive Brokers a safe haven for your money. Discover some of the reasons why IB, the largest independent US broker/dealer, is the professional traders' and investors' choice.

Visit: Interactive Brokers

Be the first to comment

Leave a Reply

Your email address will not be published.