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Puma Biotech on fire after calls hit

Jon "DRJ" Najarian (ask-drj@optionmonster.com)

Puma Biotechnology is set to triple today, but option traders are looking at even bigger profits.

The company announced positive top-line results from a Phase III trial of its PB272 breast-cancer drug.

PBYI closed under $60 yesterday but is over $210 in the premarket!!

optionMONSTER's Heat Seeker shows someone bought 1,000 August 75 calls a week ago for $7.45. That would be a $745,000 investment to own shares at $75. Against this they sold 1,000 of the August 100 calls for $2.61, generating $261,000 credit from that sale.

Their net investment was thus $484,000, which controls PBYI from $75 to $100. So, they're now looking at a profit of $20.16 or $2,016,000. See our Education section for more on the strategy, known as a vertical spread.

Into the American Society of Clinical Oncologist Conference, it averaged 800 calls per day. Since then it's been even more anemic, except for that big day on July 15, when it traded 3,600 calls. Now Puma Biotech barely traded 1600 calls the day after they presented some positive results at ASCO, so I find it FANTASTIC timing that someone decided to jump in with both feet just days ahead of such a market moving release.

Here is a breakdown from last Monday - Today of call volumes in PBYI

  • 7/14: 700 contracts
  • 7/15: 3,600 contracts
  • 7/16: 1,350 contracts
  • 7/17: 1,250 contracts
  • 7/18: 1,600 contracts
  • 7/21: 1,700 contracts
  • 7/22: 400 contracts

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