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Options Traders Betting on Nektar Pipeline

Tuesday, 4 Oct 2011 | 7:59 AM ET

Nektar Therapeutics has some potentially high-value drugs in its pipeline, and bullish option traders are stepping in.

Yesterday's activity focused on the February 5 calls, with several large blocks bought for $0.60 as investors positioned for a rally, according to OptionMonster's real-time tracking systems. About 4,000 of those options traded against previous open interest of just 53 contracts at that strike, so these are new positions.

The company has a robust R&D pipeline includes treatments in oncology, pain, and other areas. Early last month, after Nektar announced progress in tests involving an experimental drug for chronic pain, traders were focusing on the February 7 calls .

The stock hasn't performed well since then and dropped another 8.66 percent to $4.38 yesterday. Short interest is fairly high, and those bears have been rewarded.

Now the bulls are positioning for the shares to reach at least $5.60--the $5 strike price plus the $0.60 premium paid for the February 5 calls yesterday--by expiration on Feb. 17. That would be a gain of nearly 28 percent, the point at which the calls would start to become profitable.

Nektar is scheduled to report earnings results on Nov. 3.

Another view: Jim Cramer talks biotech with ImmunoGen CEO.

—Najarian has no positions in NKTR.

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Pete Najarian is a professional investor, CNBC contributor, regular co-host of CNBC's "Fast Money" and co-founder of OptionMonster.com.

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