Ligand (LGND) Plummets 9.8%: A Volatile Intraday Drama Unfolds

Summary
• Ligand Pharmaceuticals (LGND) plunges 9.82% to $186.50, erasing $20B in market cap
• Intraday swing of $22.53 (175.89–198.425) highlights extreme volatility
• Options chain sees 20 contracts trading, with 5-volume call (LGND20260220C170) down 45.53%

Today’s session for Ligand Pharmaceuticals has turned into a high-stakes thriller, with the stock collapsing nearly 10% from its opening price of $196.96. The sharp decline, coupled with a 3.77% turnover rate and a 52-week low of $93.58 looming, signals a critical inflection point. With the biotech sector broadly under pressure and AMGN (sector leader) down 1.09%, investors are scrambling to decipher whether this is a short-term correction or a deeper structural shift.

Options Volatility and Short-Term Technical Divergence Drive Sharp Drop
The intraday collapse of LGND appears driven by a combination of short-covering in leveraged options and a breakdown of key technical levels. The stock’s price fell below its 30-day moving average ($194.07) and 200-day average ($150.76), triggering stop-loss orders and accelerating the decline. The Bollinger Bands (Upper: $206.31, Lower: $185.97) show the price has pierced the lower boundary, suggesting a bearish reversal. Meanwhile, the options chain reveals aggressive shorting, particularly in the February 2026 180-strike puts (LGND20260220P180), which have surged 229.41% in turnover, indicating institutional bearishness.

Options Playbook: Capitalizing on Volatility with High-Leverage Puts
• MACD: 2.21 (above signal line 0.74), RSI: 61.17 (neutral), 200D MA: $150.76 (below current price)
• Bollinger Bands: Price at $186.50 (near lower band $185.97), 30D MA: $194.07 (key support)

The technical setup suggests a short-term bearish bias, with the 200-day average acting as a potential floor. For aggressive traders, the LGND20260220P180 and LGND20260220P185 puts offer compelling risk/reward profiles:

• LGND20260220P180
- Code: LGND20260220P180
- Type: Put
- Strike: $180
- Expiration: 2026-02-20
- IV: 50.41% (moderate volatility)
- Leverage Ratio: 22.30% (high sensitivity)
- Delta: -0.3625 (moderate directional exposure)
- Theta: -0.0664 (time decay)
- Gamma: 0.0121 (price sensitivity)
- Turnover: 1,407 (liquid)
- Payoff (5% downside): $13.25 (max(0, 180 - 177.18))
- Why: High IV and leverage ratio position this for a 5% move below $186.50, with gamma amplifying gains as price drops.

• LGND20260220P185
- Code: LGND20260220P185
- Type: Put
- Strike: $185
- Expiration: 2026-02-20
- IV: 43.40% (moderate volatility)
- Leverage Ratio: 20.81% (high sensitivity)
- Delta: -0.4244 (strong directional exposure)
- Theta: -0.0384 (time decay)
- Gamma: 0.0147 (price sensitivity)
- Turnover: 2,577 (liquid)
- Payoff (5% downside): $8.35 (max(0, 185 - 177.18))
- Why: Strong delta and gamma make this ideal for a mid-term bearish play, with IV providing cushion against time decay.

If $180 breaks, LGND20260220P180 offers a high-leverage short-side bet. Aggressive bulls may consider LGND20260515C190 into a bounce above $190.

Backtest Ligand Stock Performance
Ligand Pharmaceuticals (LGND) has experienced a significant intraday plunge of approximately -10% from the beginning of 2022 until now. Following this downturn, LGND's stock performance exhibited a robust recovery trend. Here's a detailed analysis based on the backtested data:1. Earnings Performance: LGND's Q1 2022 earnings report revealed a substantial year-over-year decline, with an estimated EPS of $0.66, a 53.2% decrease from the previous year, and revenue of $34.21 million, a 38.0% decrease year-over-year. Despite these challenges, the company has a strong track record of beating EPS estimates 100% of the time and revenue estimates 75% of the time over the last two years.2. Spin-Off Impact: In March 2022, LGND announced a merger agreement with Avista Public Acquisition Corp. II (APAC), leading to the spin-off of its OmniAb business. This move is expected to enhance the focus of the remaining business and potentially improve its financial performance.3. Market Dynamics: The broader market environment has been challenging for high-frequency trading strategies, characterized by low liquidity and unpredictable volatility spikes. However, LGND's performance post-plunge suggests resilience and the potential for recovery in a recovering market sentiment.In conclusion, while LGND faced a significant downturn from the start of 2022, its subsequent performance indicates a strong recovery, supported by strategic business moves and the broader market's recovery. Investors should monitor the company's financial performance post-spin-off and market sentiment to gauge its future trajectory.

Act Now: Short-Term Bearish Play with High-Volatility Puts
The sharp intraday drop in LGND reflects a breakdown of key technical levels and aggressive shorting in the options market. With the 200-day average ($150.76) and 52-week low ($93.58) looming, the near-term outlook remains bearish. Investors should prioritize the LGND20260220P180 put for a high-leverage, high-liquidity play on a 5% downside scenario. Meanwhile, AMGN’s -1.09% decline underscores sector-wide pressure, reinforcing the need for caution. Watch for a breakdown below $180 or a rebound above $190 to dictate next steps.