How volatility trade is playing Xoma

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A trader is focusing on volatility in drug developer Xoma rather than whether the stock will move higher or lower.

optionMONSTER systems show that 6,056 options have traded, compared to a daily average of 1,000 in the last month. One print of 6,000 December 5 calls makes up virtually all of that action, trading for $0.85 against open interest of 1,454 contracts.

About 2 minutes later, the biggest block of stock changed hands as 300,000 shares traded for $4.41. If the it was bought against the options, this would create a delta-neutral position that is focused on the volatility of the options and stock as opposed to a directional move. (See our Education section)

XOMA is down 4.07 percent to $4.50 in midday trading. The pharmaceutical company, which focuses which focuses on antibody-based therapeutics, climbed climbed from $3.60 a week ago but was above $5.50 just one month ago.

The average implied volatility of the options is 99 percent, while the 20-day historical volatility for the stock is 114 percent.


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