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Bullish Speculation Heats Up on Dendreon Sale Chatter

DNDN calls were the options of choice on Tuesday

by 12/19/2012 9:25 AM
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Bullish speculators swarmed Dendreon Corporation (NASDAQ:DNDN - 5.39) on Tuesday, with call volume on the biotech stock surging to four times the daily average. Approximately 18,000 calls traded on DNDN during the course of the session, easily outstripping the 4,443 puts that changed hands.

Data from the major options exchanges confirms a strongly bullish bias to the day's trading. Speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) bought to open 3,537 calls on DNDN yesterday, compared to just 268 puts -- netting the stock a single-day call/put volume ratio of 13.20.

In fact, calls have rarely been more popular on DNDN. The security's 10-day ISE/CBOE/PHLX call/put volume ratio currently stands at 18.05, which ranks higher than 95% of other such readings taken during the past year. In other words, options players on these exchanges have picked up calls over puts at a faster pace only 5% of the time in the previous 52 weeks.

That said, it's also worth noting that nearly 30% of DNDN's float is sold short. Taking this in context with the recent uptick in call-buying activity, it's possible that some of the stock's short sellers are buying calls in order to hedge their bearish plays, rather than to bet on a bounce for the biotech.

DNDN has lost 29% of its value so far in 2012, but the stock recently broke out above resistance at its 10-week moving average. Now the shares are testing their 32-week trendline, currently located at $5.40 -- just north of the stock's Tuesday close at $5.39.

 Weekly Chart of DNDN since February 2012 With 10-Week and 32-Week Moving Averages

On Tuesday, DNDN rallied on reports that the company plans to sell most of its headquarters, which contributed to speculation that the Provenge parent may be putting itself up for sale. After surging nearly 6% yesterday, the stock is trading fractionally lower ahead of the bell.


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