Ziopharm Oncology is expected to release key drug data by the end of the year, and traders are looking for good news.
optionMONSTER's Heat Seeker tracking system detected the purchase of more than 5,000 April 7 calls for $0.65 to $0.80. Volume was more than 45 times previous open interest at the strike.
Those buyers have now locked in a $7 purchase price on the company, whose Palifosfamide cancer drug is undergoing Phase 3 trials. The stock could rip higher if the results are positive, causing those calls to generate major leverage.
If the data misses expectations, however, ZIOP could fall sharply. Owning calls rather than shares limits that risk and is more effective than picking arbitrary stop-loss levels.
This is especially useful because the drug-trial data will probably be released outside of market hours, potentially causing a price gap during extended trading. (See our Education for more ideas on how options can be used to manage risk.)
ZIOP is up 0.59 percent to $5.11 afternoon trading and has been grinding higher since the first half of 2009. More than 5,300 contracts have traded in the name so far today, compared with about 1,000 in a typical session. Calls account for a bullish 98 percent of the volume.
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