XOMA Royalty Plunges 22.8%: What's Fueling the Sudden Sell-Off?

Summary
• XOMA Royalty (XOMA) trades at $26.525, down 22.8% from its previous close of $34.36
• Intraday range spans $25.51 to $29.45, signaling extreme volatility
• Options chain shows 104.76% implied volatility on the XOMA20251219P25 put contract
• The stock’s 52-week range (18.35–39.92) now appears under pressure as it tests lower bounds. This sharp decline, absent direct company news, raises urgent questions about technical triggers and options-driven sentiment.

Technical Downtrend Intensifies Amid Volatile Options Activity
The 22.8% intraday drop in XOMA Royalty reflects a confluence of technical exhaustion and bearish options positioning. The stock’s price has pierced below its 200-day moving average ($28.40) and the lower Bollinger Band ($29.61), confirming a breakdown in long-term support. Meanwhile, the options chain reveals aggressive short-term bearishness: the XOMA20251219P25 put contract (expiring Dec 19) trades with 104.76% implied volatility and a 26.6% leverage ratio, indicating leveraged capital targeting further downside. High turnover (600 shares) on this contract suggests institutional positioning for a continuation of the selloff.

Bearish Options Playbook: Leveraged Puts and Short-Term Expiry Focus
• Technical Indicators:
- 200-day average: $28.40 (below current price)
- RSI: 55.26 (neutral but trending lower)
- MACD: -0.529 (bearish divergence)
- Bollinger Bands: Price at $26.525 vs. lower band at $29.61
• Key Levels: Immediate support at $25.51 (intraday low), then $21.28 (200D support range). Resistance at $29.45 (intraday high).
• Top Options:
- XOMA20251219P25 (Put, $25 strike, Dec 19 expiry):
- Implied Volatility: 104.76% (extreme bearishness)
- LVR: 26.6% (high leverage)
- Delta: -0.32 (moderate sensitivity)
- Theta: -0.043 (moderate time decay)
- Gamma: 0.0818 (high sensitivity to price swings)
- Turnover: 600 (liquid)
- Payoff: At 5% downside (25.1975), intrinsic value = $25.1975 - $25 = $0.1975. With 26.6% leverage, potential return = $0.1975 / $25.525 26.6% ≈ 2.07% in 9 days.
- XOMA20260116P25 (Put, $25 strike, Jan 16 expiry):
- Implied Volatility: 60.87% (moderate bearishness)
- LVR: 21.28% (moderate leverage)
- Delta: -0.33 (moderate sensitivity)
- Theta: -0.014 (low time decay)
- Gamma: 0.0703 (high sensitivity)
- Turnover: 750 (liquid)
- Payoff: Same 5% downside yields $0.1975 intrinsic value. With 21.28% leverage, potential return = $0.1975 / $25.525 21.28% ≈ 1.65% in 36 days.
• Action: Aggressive short-term bears should prioritize the XOMA20251219P25 put for its high gamma and leverage. For a longer-term bearish view, the XOMA20260116P25 offers lower time decay but reduced leverage. Both contracts benefit from the stock’s current oversold condition and elevated volatility. Hook: If $25.51 breaks, XOMA20251219P25 becomes a high-conviction short-term bear play.

Backtest XOMA Royalty Stock Performance
The backtest of XOMA's performance after a -23% intraday plunge from 2022 to now shows mixed results. While the stock experienced a maximum return of 8.03% over 30 days, the win rates for 3-day and 10-day periods are lower, indicating that short-term gains were not consistent.

Urgent: Watch $25.51 Support and Options-Driven Liquidity
The selloff in XOMA Royalty appears technically driven, with options positioning amplifying the downward spiral. Immediate focus should be on the $25.51 intraday low as a critical support level—if breached, it could trigger a cascade into the $21.28–$20.85 range. The sector leader IBM (-0.14% intraday) remains stable, contrasting with XOMA’s volatility. Investors should monitor the XOMA20251219P25 put for liquidity signals and watch for a potential bounce above $29.45 to assess reversal strength. Action: Short-term bears target $25.51 breakdown; bulls await a retest of $29.45 with RSI above 55 as a potential reversal trigger.