Learn the trade here. Make it on tradeMONSTER

Options Trading News

May 11, 2012  Fri 12:04 PM CT

ARNA: SEE CHART GET CHAIN FIND STRATEGIES
Arena Pharmaceuticals has given up some of the gains from its pre-market spike, but a large call spread is counting on more upside.

ARNA trades at $6.04 this afternoon, up 65 percent on the day. The drug developer opened the session at $7.02 after the Food and Drug Administration advisory panel voted to approve the company's lorcaserin weight-loss medicine. Shares were down at $2 just a couple of weeks ago.

A trader sold 9,700 July 7 calls for $0.90 against open interest of 26,565, according to optionMONSTER's Heat Seeker system. At the same time, he or she bought 9,700 October 7 calls for $1.35 at nearly 3 times the open interest at that strike, indicating that a new position being opened.

The trader could be rolling a long position forward, selling the July calls and buying the October contracts to get more time for ARNA to continue rallying. Or this could be a calendar spread that is looking for Arena to trade back up around that $7 level in coming months. The latter spread risks only $0.45 until that first expiration. (See our Education section)
 
The activity has pushed ARNA's total option volume to more than 185,000 so far today, compared with a daily average of 46,000.
Share this article with your friends


TRADING WEEKLY OPTIONS

The fastest money in the market
View full report »

Premium Services

Free Webinars

Education & Strategy

Why traders hedge with sector ETFs

Many people who are not familiar with options think that they increase risk, but their first and primary purpose is...

View more education articles »
optionMONSTER stockMONSTER tradeMONSTER