Options Trading News

August 8, 2013  Thu 10:21 AM CT

Xoma is falling today on weak enrollment in a drug study, but one investor isn't giving up hope.

optionMONSTER's Heat Seeker monitoring system detected the purchase of 2,775 October 5 calls for $0.90 and the sale of an equal number of September 5 calls for $0.30. Volume was below open interest in the front-month contracts, indicating that an existing position was closed and rolled forward in time.

Long calls lock in the price where shares can be purchased in the drug developer, letting investors control upside in the stock at limited cost. Adjusting the position today cost him or her $0.60 but provides an additional month to benefit from a potential rally. It also prevents them from losing premium to time decay as expiration approaches next Friday. (See our Education section)

XOMA is down 13.07 percent to $4.61 in morning trading after CEO John Varian cited weak recruitment for the Eyeguard-A and C trials of its gevokizumab inflammatory drug. He said the company is trying to fix the problem.

Today's call roll gives the company more time to regain its momentum. XOMA came into the session up more than 100 percent since the beginning of the year.

Total option volume is 13 times greater than average so far today, with calls outnumbering puts by a bullish 18-to-1 ratio.
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