Sorrento Therapeutics Forms Bullish Pattern, Options Traders Place Bets

Sorrento Therapeutics, Inc SRNE shot up over 10% on June 24 after the company announced it received EUA approval and an import license from COFEPRIS for its rapid COVID-19 test, COVI-STIX.

The stock is also a favorite of Reddit communities because of its underlying statistics. Although the amount of shares held short has dropped slightly from 53.42 million shares in May to 50.83 million in June, 17.62% of Sorrento’s 256.83 million share float is still held short.

On Friday and Monday, Sorrento’s stock was consolidating the June 24 move and creating a bull flag pattern on the daily chart. A number of options traders believe the bull flag is about to propel Sorrento higher and purchased $511,590 worth of call contracts.

On Friday at 4:35 p.m., after regular trading hours, an institution also made a massive block trade and purchased 865,127 Sorrento shares at 9.86 per piece. The trade represents an $8.53 million bullish bet.

Why It’s Important: When a sweep order occurs, it indicates the trader wanted to get into a position quickly and is anticipating an imminent large move in stock price. A sweeper pays market price for the call or put option instead of placing a bid, which sweeps the order book of multiple exchanges to fill the order immediately.

These types of call option orders are usually made by institutions, and retail investors can find watching for sweepers useful because it indicates “smart money” has entered into a position.

When a block trade occurs it indicates a hedge fund or institution has taken a position in common shares. A block trade always involves large sizing and is typically handled by a blockhouse privately and outside of the open market. Because block trades don’t happen on the open market the large size of the trades doesn’t create volatility in the stock being traded.

These types of purchase orders are made by institutions purchasing a large number of a security and retail investors can find watching for block trades useful because it indicates “smart money” has entered into a position.

The Sorrento Therapeutics Option Trades: Below is a look at the notable options alerts, courtesy of Benzinga Pro:

• At 9:57 a.m., Monday a trader executed a call sweep at the ask of 299 Sorrento Therapeutics options with a strike price of $10 expiring on January 20, 2023. The trade represented a $119,600 bullish bet for which the trader paid $4 per option contract.
• At 10:41 a.m., a trader executed a call sweep at the ask of 363 Sorrento Therapeutics options with a strike price of $10 expiring on Dec. 17. The trade represented a $83,490 bullish bet for which the trader paid $2.30 per option contract.
• At 11:01 a.m., a trader executed a call sweep at the ask of 480 Sorrento Therapeutics options with a strike price of $15 expiring on January 20, 2023. The trade represented a $160,800 bullish bet for which the trader paid $3.35 per option contract.
• At 11:19 a.m., a trader executed a call sweep at the ask of 422 Sorrento Therapeutics options with a strike price of $15 expiring on January 20, 2023. The trade represented a $147,700 bullish bet for which the trader paid $3.50 per option contract.

SRNE Price Action: Shares of Sorrento Therapeutics trade around $9.88 at publication time.