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Dendreon Sees Last-Minute Call Activity

DNDN calls are trading at four times the normal pace

by 1/11/2013 1:41 PM
Stocks quoted in this article:

Option speculators are circling Dendreon Corporation (NASDAQ:DNDN - 5.85), particularly on the call side of the aisle. So far today, the drug maker has seen roughly 16,000 calls cross the tape -- about four times its average intraday call volume, and nearly three times the number of puts exchanged.

Digging deeper, it appears traders are establishing eleventh-hour bets at the weekly 1/11 6-strike call, which has seen more than 2,000 contracts change hands on open interest of fewer than 1,300 contracts. A healthy portion of the calls crossed at the ask price, pointing to buy-to-open activity.

By purchasing the calls to open, the buyers are expecting DNDN to extend today's momentum into the close. More specifically, the calls traded at a volume-weighted average price (VWAP) of $0.08, meaning the buyers will reap a reward if DNDN topples the $6.08 level (strike plus VWAP) by the end of the day, when the weekly options expire. So far, DNDN has topped out at $6.05 in intraday action.

Bolstering the stock was a relatively rare analyst note, with Bernstein upgrading its opinion to "outperform" from "market perform," and predicting "slow but steady revenue growth" amid signs of increasing Provenge prescriptions. Furthermore, the brokerage firm upped its price target by 43% to $10, representing a premium of more than 70% to DNDN's current share price. Currently, just one out of 18 analysts considers DNDN worthy of a "buy" or better endorsement.

At last check, DNDN has advanced 14.6% to linger in the $5.85 region.


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