Ziopharm Bulls Bet on Explosive Move
Shares of Ziopharm Oncology gapped higher this week, and option traders are betting on even larger gains ahead.
OptionMonster's tracking systems showed heavy buying in the May 7 calls, including one big block of 3,500 contracts for $0.70. Open interest was a mere 145 contracts coming in today, so someone obviously believes that this $245,000 investment will yield big returns.
Calls lock in the price investors must pay to buy a stock. They can generate nice leverage in the event of a rally, but will expire worthless if the shares don't rise above the $7 strike price by mid-May.
At the beginning of this week, Ziopharm was a $4 stock. Now, after a presentation at an industry conference and Phase III trials of Palifosfamide treatment on soft-tissue sarcoma looking extremely positive, shares are closer to $5.
Palifosfamide belongs to a group of chemotherapy drugs called alkylating agents, which halt tumor growth by binding to cancer-cell DNA and interfering with its function. Full results are expected by the end of this quarter.
Ziopharm shares ended yesterday's session up 0.21 percent to $4.70. Calls dominated its option activity, outnumbering puts by a bullish 15-to-1 ratio.
—By CNBC Contributor Jon "DRJ" Najarian
Options Trading School:
Jon "DRJ" Najarian is a professional investor, CNBC contributor, regular co-host of CNBC's "Fast Money," co-founder of optionMONSTER and tradeMONSTER, and co-lead analyst for the InsideOptions trade idea alert systems. Najarian owns ZIOP call spreads.