Options Trading News

September 20, 2012  Thu 9:57 AM CT

Onyx Pharmaceuticals has been climbing and the bulls are staying in the trade.

Two days ago, our Heat Seeker program detected unusual activity as an investor boosted by 50 percent the size of a short-term upside trade. Today a trader is going further out in time, but the sentiment remains solidly positive.

A block of 2,500 February 95 calls was purchased for $5.70 and an equal number of February 85 calls was sold for $9.55. Volume was below open interest in the 85s, which indicates that an existing long position was closed and rolled to the higher strike.

The investor collected a credit of $3.85 and will make more money if the drug developer continues to rally. It's already up more than 80 percent since June after a Food and Drug Administration panel voted to recommend approval of the company's Kyprolis blood-cancer drug.

ONXX is down 1.9 percent to $84.19 this morning after hitting an all-time high above $86 yesterday. If today's option trader expects a pullback, it makes sense to roll the calls because the February 85s have a greater delta than the 95s (0.55 versus 0.38). That would make them more sensitive to losing value from a near-term decline in the share price. (See our Education section)

Overall option volume is triple the daily average in ONXX so far today, with calls outnumbering puts by more than 500 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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