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Will Cell Therapeutics Stay Above New-Found Support?

Speculators are looking for the $1 level to hold through December expiration

by 10/12/2012 10:15 AM
Stocks quoted in this article:

Cancer treatment research firm Cell Therapeutics Inc (NASDAQ:CTIC - 1.48) was met with heavy options activity during yesterday's session. CTIC saw roughly 35,000 puts change hands during the course of the session -- about 154 times its average daily volume. For comparison, just 73 calls crossed the tape.

The most active strike on Thursday was CTIC's December 1 put, where 34,951 contracts changed hands. Several blocks traded at the bid price, indicating that sellers were responsible for most of the volume. Open interest on the December 1 put rocketed overnight by roughly 35,000 contracts, confirming that new bets were added at this near-the-money strike. The contracts were sold at a volume-weighted average price (VWAP) of $0.11, which the sellers can pocket as long as CTIC remains north of $1 when December expiration rolls around.

This activity seemed to coincide with CTIC's recent bounce from the $1.40 level, which has emerged as a technical backstop over the past week. In fact, just a week ago, the company said an underwritten public offering of 60,000 shares of its Series 17 preferred stock priced at $1,000 a share -- each convertible at the option of the holder into about 714 shares of common stock, a conversion price of $1.40 per share. On a relative-strength basis, CTIC has lagged the broader S&P 500 Index (SPX) by nearly 56 percentage points over the past 60 session, but the shares still maintain a commendable 21.6% year-to-date return.

From a sentiment standpoint, Thursday's affinity for puts echoes the growing trend seen in the options pits. CTIC's Schaeffer's put/call open interest ratio (SOIR) arrives at 2.81, signaling that puts nearly triple calls among options expiring within three months. This ratio registers in the 100th percentile, suggesting that near-term options players have never been more put-heavy throughout the last 12 months.

Elsewhere on the Street, some traders appear to be betting on an imminent decline for CTIC. Short interest jumped 15% over the most recent reporting period, and now makes up a healthy 17.7% of the stock's available float. At the security's typical pace of trading, it would take four days to buy back all of these bearish bets.

On the fundamental front, it's worth noting that the biotech company is tentatively slated to reveal its third-quarter earnings later this month, which could explain the uptick in both short selling and sell-to-open put activity.

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