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XOMA receives a vote of confidence

Chris McKhann (chris.mckhann@optionmonster.com)

Shares of XOMA popped yesterday, and one trader is betting that the biopharmaceutical company will hold above a nine-month support level.

The total option volume of 3,088 that turned over in the name yesterday may not be huge, but it is significant considering that XOMA has averaged just 27 contracts per session in the last month. And almost all of the day's activity was in a single trade.

optionMONSTER systems show that 3,000 April 2.50 puts were sold in one print for $0.22 on a wide bid/ask spread. This is a new position, as there was no open interest in that strike before the session began.

The put selling is a bet that XOMA will hold above the $2.50 strike price through expiration in mid-April. If the stock falls below that level, the trader faces the obligation to buy shares at an effective price of $2.28 when the credit from the put sale is included. (See our Education section)

XOMA jumped 8.17 percent to close at $2.715. Shares bounced off support at $2.50 yesterday, a level that has held since last June except for a couple of days at the end of the year.

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