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Option Speculators Circle Celsion

CLSN is seeing accelerated options activity

by 1/17/2013 12:44 PM
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Option speculators have set their sights on Celsion Corporation (NASDAQ:CLSN - 7.37), with many traders gambling on more downside for the drug developer. So far today, CLSN has seen about 30,000 calls and 19,000 puts change hands, far surpassing its average midday volume of about 5,700 calls and 6,500 puts.

Attracting notable attention have been the February 3.50 and April 4 puts, which have seen around 2,600 and 2,000 contracts traded, respectively. The majority of the puts have crossed at the ask price, and implied volatility was last seen higher at both strikes, suggesting speculators are buying the puts to open.

The February 3.50 puts traded at a volume-weighted average price (VWAP) of $1.20, meaning the buyers will profit if CLSN breaches the $2.30 level (strike minus VWAP) by the closing bell on Friday, Feb. 15, when the soon-to-be front-month options expire. Meanwhile, the VWAP of the April 4 puts is $1.79, indicating the buyers will reap a reward if CLSN falls beneath the $2.21 level by options expiration on April 19. However, considering CLSN's longer-term uptrend, the traders could be buying the puts to lock in profits on their CLSN shares.

Whatever the motive, today's affinity for puts is just more of the same for CLSN. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open almost two CLSN puts for every call during the past two weeks. In fact, the equity's 10-day put/call volume ratio of 1.79 stands just 1 percentage point from a 12-month acme, suggesting options players are initiating pessimistic positions at a near annual-high rate.

As a result, the stock's Schaeffer's put/call open interest ratio (SOIR) sits at 1.36, indicating that puts outnumber calls among options with a shelf-life of three months or less. Furthermore, this ratio stands higher than 96% of all other readings of the past year, implying that near-term options traders have rarely been more put-heavy during the past 52 weeks.

Technically speaking, the shares of CLSN have given up about 22% since touching an eight-year high of $9.44 on Tuesday, and are in danger of ending south of their 10-week trendline for the first time in more than two months. During the course of Wednesday's session, the stock was briefly halted ahead of Phase 3 study results for Celsion's liver cancer treatment, slated for release sometime this month. Furthermore, Seeking Alpha encouraged investors to cash in their chips, stating "odds are the stock is about to take off or tank."

In today's session, Brean Capital exacerbated selling pressure with a downgrade to "sell" from "buy," citing "robust share price strength prior to a highly binary event in 1Q13 that, in our view, will define whether or not the company remains viable thereafter."


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