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Virgin Galactic Options Show Earnings May Push Shares to Record

Virgin Galactic Options Show Earnings May Push Shares to Record

(Bloomberg) -- Virgin Galactic Holdings Inc. options investors are anticipating a 23% move in the stock after the company’s fourth-quarter earnings report, with a tilt toward contracts betting on gains that would propel shares past last week’s record high.

The stock has already more than tripled in 2020, trading around $35 on Tuesday afternoon, as institutional and retail investors alike pile in on the prospects of Richard Branson’s space transport company becoming profitable as an early entrant to a nascent industry. That enthusiasm is also evident in the options market, where daily volume has increased about 150% in the past four weeks.

Options expiring Friday are leaning bullish. Among all of them, calls outnumber puts by a ratio of 1.12-to-1. A closer look at just those contracts with strike prices between $27 and $43, which make up the bulk of open interest, shows calls outnumber puts by 1.27-to-1.

Virgin Galactic Options Show Earnings May Push Shares to Record

The earnings release due out after the close of trading Tuesday will be the second since Virgin Galactic Holdings Inc. acquired Virgin Galactic LLC for $1.3 billion in October. However, it will be the first accompanied by a conference call. Wall Street coverage is sparse, with only three analysts officially covering the stock. All of them have buy ratings, and their average price target is $19.

Options expiring on Friday make up about 21% of the total open interest. Among all contracts on Virgin Galactic, the ratio of calls to puts is 1.75-to-1. Current implied volatility is elevated at 307%, which is more than 3 times the 90-day average of 89.

To contact the reporter on this story: Gregory Calderone in New York at gcalderone7@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Richard Richtmyer, Brendan Walsh

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