Care Therapeutics Inc (NASDAQ:CARA) is seeing a influx of options activity today, following news that the U.S. Food and Drug Administration (FDA) approved its Korsuva difelikefalin injection to treat moderate-to-severe itching in adult patients with chronic kidney disease undergoing dialysis. So far, 17,000 calls and 8,979 puts have crossed the tape — 10 times the intraday average. The most popular position midday is the September 17.50 call, followed by the 20 call in the same front-month series. Positions are being sold to open at both, suggesting these traders are speculating on limited upside for the underlying stock by the time these options expire next month.
The security is surging today, though. CARA was last seen up 5.2% at $15.02, and earlier hit a four-month high of $18.25. The equity got a rude awakening back in April after suffering a massive bear gap late in the month, and has since been consolidating just below the $15 level. This region is being tested during today’s trading too, though the stock looks ready to clear its 90-day moving average for the first time since its aforementioned April bear gap.
The news has captured the attention of the brokerage bunch, too. Earlier, H.C. Wainwright upped its price target to $35 from $33. Analysts were mostly bullish coming into today, with CARA sporting a 12-month consensus price target of $26.33 — a whopping 76% premium to current levels — and all but two of the eight analysts in coverage calling the stock a “buy” or better.
Options traders, on the other hand, have been more pessimistic than usual. This is per the equity’s 50-day put/call volume ratio of 1.00 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits in the 93rd annual percentile of its annual range. This means long puts have been popular, which could create tailwinds, should some of this pessimism begin to unwind.
A short squeeze could put some fire under Care Therapeutics stock as well. Short interest has been slowly dissolving, down 3.9% in the last two reporting periods. However, the 3.05 million shares sold short make up a healthy 7.8% of the stock’s available float, or over a week’s worth of pent-up buying power.