Options Trading News

December 11, 2012  Tue 12:20 PM CT

A trader expects some good news from Oncothyreon, which will report data on a potential cancer vaccine early next year.

optionMONSTER's Heat Seeker trade scanner detected the purchase of 5,000 January 10 calls for $0.60 and the sale of an equal number of January 20 calls for $0.10. Volume surpassed open interest at both strikes, indicating that a new spread was opened.

ONTY is up 7.71 percent to $4.33 in afternoon trading. Today's option trade, known as a bullish call spread, is looking for the stock to more than quadruple to $20 over the next six weeks. If it that happens, then the spread will expand to $10--a 1,900 percent profit over its $0.50 opening cost.

The company is developing its Stimuvax cancer drug with Germany's Merck KGaA, which has said Phase III data will be released in the first quarter. Given that these January calls expire long before the end of the quarter, today's buyer apparently expects some positive news sooner rather than later.

Implied volatility has been rising in ONTY as investors look forward to the data being released. It now stands at about 240 percent, up from 74 percent at the beginning of last month.

Total option volume is triple the daily average so far today, with calls outnumbering puts by 20 to 1.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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