Cassava Sciences, Inc. (SAVA), Trending Stock Report

Cassava Sciences, Inc. (SAVA) is trending in news and social media. Someone posted in social media about making a ton of money in SAVA calls over the last 2 days. This prompted a wave of comments which took social media mentions up 4600% in the last 24 hours. The market’s reaction prompted Yahoo to list SAVA as a trending ticker and all of this prompted us to take a closer look.

The stock is heavily shorted, so much so that the borrow rate is at -73%. Normally this is enough to cause us to avoid taking action on the stock. But then we noticed that the options at the 10 strike for August 16^th expiration still had a bid price and the implied volatility of the bid is a whopping 401%. You can see by the yellow line in the chart below that the stock has technical support near $10.

This stock is completely uncorrelated to the moves in the overall market. When the market was rising on AI expectations, SAVA was falling. Over the last 2 trading days, while the market was cascading down, SAVA was up 52% from the open on Friday. With all of the social media mentions this stock is developing meme status.

This Volatility Term Structure for SAVA shows us the implied volatility of the at-the-money options for the August 16^th expiration are very high at 261%. To learn more about Volatility Term Structure, click here. That implied volatility is for the at-the-money options. The implied volatility of the options at the 10-strike price are over 400%. Normally options that far out of the money would not have a bid price. But this is not a normal situation.

This MDM graph compares the modeled expectations of current options prices (the orange line) to the actual movement of SAVA’s stock price over the past 5 years. You can see that the actual behavior, including the giant moves during the COVID crisis (the blue histogram) shows us that SAVA did NOT make big moves as frequently as modeled options prices currently expect. That is good news for a high-probability option selling strategy.

SAVA’s volatility expectations and option prices are extremely high. They are so high that we can sell options that are so far out-of-the-money that they would normally not even have a bid price.

To get the specific strike price and limit price on today’s trade idea, be sure to read today’s ODDS Online Daily Option Trade Idea.