Bullish bets were unusually popular on Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) yesterday, with call volume on the drug stock rising to more than three times the expected level. Roughly 39,000 calls traded on ARNA during the course of Tuesday's session, easily outnumbering the approximately 13,000 puts that changed hands.
Buy-to-open data from the major options exchanges confirms a strong preference for calls over puts on ARNA. Speculators purchased 6,599 calls on the shares yesterday, according to the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), while only 2,123 puts were picked up.
Tuesday's most active ARNA strikes were the May 9 call, where 4,794 contracts crossed the tape, and the May 8 call, which traded volume of 3,971 contracts. The majority of these calls traded near the ask price, and open interest rose at both strikes overnight -- confirming the addition of new long calls on Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) during yesterday's action.
It's been a rough 2013 for ARNA so far, with the stock down roughly 7.5% year-to-date through Tuesday's close. However, yesterday's influx of bullish option volume coincided with a 10.9% spike in Arena shares, as traders cheered signs of progress on the launch of the company's Belviq weight-loss drug. The stock settled at $8.34 by the close -- landing squarely between the day's two most popular front-month call strikes.
Following this upbeat fundamental news, ARNA could benefit from a rush to cover. Short interest currently accounts for an outsized 28.8% of the stock's float, and it would take nearly 17 trading days for all of these bearish bets to be covered, at ARNA's average daily volume.
Ahead of the bell this morning, the stock is up 2.6% at $8.56, on track to conquer its 80-day moving average for the first time since Jan. 18.