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January 16, 2013  Wed 1:47 AM CT

NKTR: SEE CHART GET CHAIN FIND STRATEGIES
Nektar Therapeutics has been rebounding sharply in the new year, and one bullish trader is looking for more gains.

A trader sold 5,000 May 8 calls for $1.90 against open interest of 9,041 contracts and, at the same second, bought 5,000 May 11 calls for $0.60 against open interest of just 36 at that strike, optionMONSTER's tracking systems show.

The trader appears to be closing the May 8 contracts, which are now in the money, and buying the May 11s. This call roll allows the trader to collect the premium from selling the lower-strike options and profit from any further gains above the $11 strike. (See our Education section)

NKTR surged 7.89 percent to $9.43 yesterday. Shares of the clinical-stage biopharmaceutical company hit resistance at the $11 level in October and then plunged below $6 by mid-November. But the stock rebounded sharply at the end of the year and last week surged through its 200- and 100-day moving averages.

Total option volume in the name exceeded 18,700 contracts, compared with a daily average of just 221 in the last month. Only 13 NKTR puts changed hands in the entire session.
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Education & Strategy

Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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