Virgin Galactic Options Show Earnings May Push Shares to Record

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 andretail 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.

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.

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