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February 14, 2013  Thu 5:16 AM CT

ZIOP: SEE CHART GET CHAIN FIND STRATEGIES
Shares of Ziopharm Oncology gapped higher this week, and option traders are betting on even larger gains ahead.  

optionMONSTER's Heat Seeker program showed heavy buying in the May 7 calls, including one big block of 3,500 contracts for $0.70. Open interest was a mere 145 contracts coming in today, so someone obviously believes that this $245,000 investment will yield big returns.

Long calls lock in the price investors must pay to buy a stock. They can generate nice leverage in the event of a rally but will expire worthless if the shares climb above the $7 strike price by mid-May. (See our Education section)

Ziopharm began the week as a $4 stock. Now, after a presentation at an industry conference and Phase III trials of Palifosfamide treatment on soft-tissue sarcoma looking extremely positive, shares are closer to $5.

Palifosfamide belongs to a group of chemotherapy drugs called alkylating agents, which halt tumor growth by binding to cancer-cell DNA and interfering with its function. Full results are expected by the end of this quarter.

ZIOP ended yesterday's session up 0.21 percent to $4.70. Calls dominated its option activity, outnumbering puts by a bullish 15-to-1 ratio.

Disclosure: I own ZIOP call spreads.

(A version of this post appeared on InsideOptions Pro yesterday.)
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