MannKind Corporation (NASDAQ: MNKD)
MannKind Corporation has been the topic of harsh criticism lately. After an unfounded Goldman Sachs downgrade, it seems like experts have decided to bash the stock left and right; ultimately driving its value down far below where it should be. However, it seems as though investors are starting to notice the opportunity if we compare the number of calls to the number of puts on the stock.
Refresher On Call & Put For Beginners
Call and put trades are derivative investments where the value of the trade derives from the value of the underlying stock. If a trader believes that a stock value will rise, he will purchase a call option. If they believe the value will fall, they purchase a put option. Options are also commonly used as a hedge to stop losses at a specific point if a trade goes in the opposite direction from what was expected. OK, now school’s out for the day, let’s get back to the data…
MNKD Calls vs. Puts
By paying attention to the amounts of calls vs. the amount of puts, we can get a gauge of where investors think the value of a stock is going to go. According to Schaeffer’s investment research, MNKD stock currently has a 16.91 call/put ratio. That means that for ever put purchased, investors are purchasing nearly 17 calls on the stock; insinuating that overall, investors are expecting growth.
Could This Be Short Sellers Hedging Against Losses?
If the ratio was a bit smaller, I would say that a hedge is a possible reason for the increase in calls. However, the number of calls vs. puts is exceptionally high. While I’m sure that short sellers are hedging and that is lending a hand to the growth in the ratio, there’s also another reason for the calls. Investors are looking for growth!
The reality is that when we look at physician feedback, MannKind’s Afrezza is a great alternative to other insulin products. It reduces critical spikes and declines in blood sugar, and gives patients peace of mind. While I would agree with the nay sayers that say Sanofi (NYSE: SNY) isn’t doing a good job of promoting and selling the insulin, we can’t discount that with a great product like this word-of-mouth will lead to growth in sales of the insulin.
What Do You Think?
Where do you think MNKD is headed? Let us know in the comments below.