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Unusual Options Activity: Snapchat (SNAP)

Posted: 08 Jul 2019 03:00 AM PDT

Big bet on social media company rallying in the next month.

Shares of social media companies have underperformed the broad market. Between a slowdown in user growth and privacy concerns, they don't look like the most attractive investment. Yet shares of these companies are off their recent lows—and at least one trader is betting on a big move higher.

Last Friday saw a surge in volume on the July 26th $19 call options on Snapchat (SNAP).

With shares trading around $15, that's a bet on shares rallying another $4 from here, or about another 26 percent.

That's a large percentage move, but for a company like Snapchat, it's certainly possible. And with the company reporting earnings on July 23, three days before the option expires, this is a cheap bet on the company moving higher.

Action to take: This option traded for around $0.14, or $14 per contract. That makes it a cheap bet on the overall market moving higher, or Snapchat in particular moving higher. However, one word of caution: With less than one month until expiration, the option has limited upside. If shares spike to $18, the option could still expire worthless. So plan to take some profits off the table following a big move.

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Drug Stocks in the Crosshairs on Trump’s “Favored Nations” Plan

Posted: 08 Jul 2019 03:00 AM PDT

Move to lowest-cost drugs could save $3 billion per year.

Drug and related stocks were among the worst market performers on Friday, after President Trump says his administration is working on a system to allow the U.S. to buy drugs based on the lowest prices paid by other countries.

Such a plan, typically known in contracts as a favored-nations clause, would help keep a lid on drug costs for consumers, but would cut into the profitability of the drug companies.

Last year, Trump proposed a similar pricing plan for drugs. Known as the International Pricing Index, the government is reviewing the program now. This program would apply to Medicare Part B, which covers drugs given by a physician in a hospital or clinic, who then seek reimbursement through the government program.

The Department of Health and Human Services indicates that such a plan would save the government over $17 billion in five years.

Action to take: Drug and healthcare stocks have already been out of favor with the market right now, and any opportunity to buy near current prices looks like an attractive entry point. Even if the companies earn a lower profit, they will still be making a profit.

This is an out-of-favor part of the market with great valuation right now, and as we've often seen, copious insider buying near current prices.

June Payrolls Rise by 224,000

Posted: 08 Jul 2019 03:00 AM PDT

Job growth goes beyond highest forecast for June.

U.S. employers added 224,000 to their payrolls in June, per the job data that was released by the Bureau of Labor Statistics on Friday.

That's about three times larger than the revised 72,000 jobs numbers from May, and indicate a strong economy. The expectation was for 160,000 new jobs at best, and the number was higher than the most bullish forecast by Wall Street traders.

The job growth was also the best monthly increase since January 2019. The numbers for May were also revised higher.

The market, trading flat ahead of the announcement, ended up taking a bit of a dive following it. That's because a strong job market weakens the argument that central banks like the Federal Reserve need to be accommodating and cut interest rates.

With some traders expecting a rate cut from the Fed as early as July, the strong jobs numbers indicate that a cut will have to rate.

A few traders even speculated that the Fed would kick off its rate cuts with a 0.5 percent cut in rates instead of the usual 0.25 percent it has moved rates in recent years.

Despite the improvement in total employment, the unemployment rate increased to 3.7 percent from 3.6 percent based on a larger total workforce. The 3.6 percent rate was a 49-year low.

Insider Activity: OncoCyte Corporation (OCX)

Posted: 08 Jul 2019 03:00 AM PDT

Major holder adds to stake in blood testing company.

Insiders in the health, pharmaceutical, and biotech space continue to buy shares of their beaten-down companies near today's prices.

The latest big buy? At shares of one of the smaller diagnostic plays, OncoCyte Corporation (OCX).

Last week, Broadwood Partners LP, which already owns more than 10 percent of shares in the company, added 1 million shares to their stake. At a price of around $2, this represented a $2 million buy.

Founded in 2009, OncoCyte works on the development and commercialization of non-invasive, blood-based diagnostic tests for the early detection of cancer. The company is also working on tests for liquid biopsies for detecting breast cancer.

Year-to-date, the company has seen shares trade between $1 and $6, depending on favorable news. Share spiked in January and have been sliding since, making the decline to around $2 about a 66 percent decline from the recent peak.

Action to take: The medical diagnostic business can be as though to analyze as favorable pharmaceutical drug treatments. However, the large buy by an insider that now owns over 9 million share is a good sign that shares will at least move higher in the coming months. At $2, buying shares is like buying an option without an expiration date.
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