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December 13, 2013  Fri 3:16 AM CT

CTIC: SEE CHART GET CHAIN FIND STRATEGIES
Cell Therapeutics saw a large put sale yesterday, the latest in a series of such trades in the name.

optionMONSTER systems show that a single trade made up almost all of the option volume in CTIC, the sale of 15,000 March 1.50 puts for $0.23. This is clearly a new position, as previous open interest in the strike was just 500 contracts.

The put seller is looking for CTIC to hold above $1.50 through expiration in mid-March, at which time the $0.23 credit would be kept as profit. But if the stock is below that strike price, the trader will be on the hook to buy shares at that level.

That could actually be the goal of this strategy, as traders sometimes sell puts in this way in hopes of picking up a stock at a discount to existing market prices. If the trader is assigned shares below $1.50, the effective purchase price of the stock would be $1.27 when the credit is included. (See our Education section)

CTIC was up 2.87 percent yesterday to close at $1.79. The cancer-drug developer was above $2 two weeks ago but down around $1.10 in mid-September.
 
Yesterday's put sale pushed total option volume in the name to 5 times its daily average for the last month. CTIC has seen similar trades on several occasions in recent months.

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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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