Bulls Bet On Arrowhead Research Corp (ARWR) to Shoot Higher

Arrowhead Research Corp has been churning around $7 over the past two weeks


Published on Oct 24, 2014 at 9:59 AM
Updated on Apr 20, 2015 at 5:09 PM

Biopharmaceutical firm Arrowhead Research Corp (NASDAQ:ARWR) has struggled on the charts lately, exacerbated by a roughly 44% plunge on Oct. 8, due to poorly received mid-stage trial results of the company's hepatitis B treatment. Since then, the shares have largely churned around $7, closing last night at $6.92. However, one group of traders yesterday wagered on short-term upside for the stock.

Diving right in, calls were exchanged at a 26% mark-up to typical daily levels on Thursday. Also, ARWR's 30-day at-the-money implied volatility rose 8.6% to 132.7%, hinting at elevated demand for short-term strikes. In fact, eight of the security's 10 most active options belong to the front-month November series.

Leading the way was ARWR's November 9 call, where 2,227 contracts changed hands. Almost all traded at the ask price, and open interest jumped overnight, suggesting bullish bets were freshly initiated. In other words, these option players believe ARWR will topple $9 by the close on Friday, Nov. 21, when front-month options expire. Of course, it's possible some of these buyers are short sellers attempting to hedge, considering 27.4% of the stock's float is sold short.

On the fundamental front, the call's lifetime encompasses Arrowhead Research Corp's (NASDAQ:ARWR) fiscal fourth-quarter earnings report, due out between Tuesday, Nov. 10, and Friday, Nov. 14. The Street is expecting a per-share loss of 24 cents from the biopharmaceutical company.

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