Large Option Trader Bullish On Acadia Healthcare Following Latest Drug Data

Acadia Healthcare Company Inc ACHC shares are up 29.2% year to date, but at least one larger option trader is betting on more upside for the biotech company in the next three months.

The Trade

On Wednesday morning, Benzinga Pro subscribers received an option alert related to an unusually large Acadia trade.

  • At 11:15 a.m., a trader bought 635 Acadia call options with a $40 strike price expiring on March 20 near the ask price at 50 cents. The trade represented a $31,750 bullish bet.

Why It’s Important

Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader.

Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.

Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge. In this case, given the relatively modest size of Wednesday’s Acadia option trade by institutional standards, it is unlikely to be institutional hedging.

Nuplazid Outlook

The large call purchase comes after Acadia shares got a boost earlier this month from positive data on Nuplazid's late-stage dementia-related psychosis trial known as Harmony presented at the 12th Clinical Trials on Alzheimer’s Disease meeting. The large option trader may be predicting more progress on Nuplazid approval after the company seemingly showed patients aren’t demonstrating any safety concerns related to the study.

Acadia said it plans to discuss a potential regulatory path for Nuplazid with the FDA sometime in the first half of 2020. Given the calls purchased on Wednesday expire on March 20, the option trader may be expecting an update from the FDA sometime in the first quarter.

Benzinga’s Take

Even after the 2019 rally, the strike price of the calls purchased on Wednesday suggests more than 21% additional upside for Acadia in about three months given the lowest break-even prices of the calls is $40.50. However, as with any biotech stock with upside hinging on data and/or regulatory approval, Acadia remains a high-risk/high-reward speculative investment.

Do you agree with this take? Email with your thoughts.

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