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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.
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