Exclusive Reuters bearish options analysis comes days ahead of 45% Savient stock plunge
10.25.2010
Reuters Insider’s exclusive analysis on October 21 foreshadowed a 45 percent daily drop in Savient Pharmaceuticals shares that happened just two days after the story first appeared. Quantitative Analyst Mike Tarsala reported unusually bearish options activity in Savient Pharmaceuticals. He noted a trader selling $27 calls and $15 puts to finance a $19 put in December on much higher-than-average volume. The strategy was designed to profit if the stock fell below the $19 price. Tarsala explained that the stock was a known takeout candidate, following FDA approval for its gout treatment Krystexxa in mid-September. With no salesforce in place, Tarsala said it was anticipated that a large suitor would buy the company quickly. However, he said the bearish options bet reflected an institutional trader’s belief that a deal was “not going to happen quickly”. Just two trading days after his options analysis, the stock was cut by more than half intraday, after the company announced it had yet to make any headway in its plan to sell itself, dashing investor hopes of an imminent sale.
Analysis link from Oct. 21: http://link.reuters.com/dyj22q
News from Oct. 25: http://www.reuters.com/article/idUSSGE69O0K020101025
