OptionsHouse

Options Trading News

August 3, 2012  Fri 2:32 AM CT

ZIOP: SEE CHART GET CHAIN FIND STRATEGIES
Someone is looking for volatility to pick up in ZioPharm Oncology.

optionMONSTER's tracking systems detected the purchase of 2,469 January 5 puts for $0.80 against open interest of just 63 contracts. Several large blocks of shares were purchased shortly after, apparently creating a so-called delta-neutral trade.

Owning puts and stock at the same time makes the investor directionally neutral on the drug developer. They stand to profit, however, from implied volatility increasing because that will inflate the value of the options. Using long-dated contracts increases the sensitivity to the change because they have a higher vega. (See our Education section)

He or she is probably looking forward to results from the ongoing Phase 3 trials of ZIOP's Palifosfamide cancer drug. Option premiums often increase as the market anticipates such data, which can make or break a company's future. Implied volatility currently stands at 57 percent versus its 38 percent historical propensity to move.

The shares rose 4.29 percent to $5.59 yesterday. It reported quarterly results after the bell, but earnings usually don't matter for a development-stage companies like ZIOP.

The delta-neutral trade pushed total option volume in the name to 9 times greater than average.
Share this article with your friends


Related Stories

ZIOP

Ziopharm attracts heavy call buying

February 9, 2016

The cancer-drug developer is down 62 percent in the last three months, but March call buyers are looking for a rebound.

OptionsHouse

Premium Services

Upcoming Webinar:

Using Options For Income

http://bit.ly/1nY1OKA

Jon Najarian and Adam Mesh of Options Wealth Machine discuss a detailed strategy utilizing credit spreads to generate income, and how any level of trader can use this simple trading technique.

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.

View more education articles »