Arrowhead Research Corporation (ARWR) Bulls Make a Surprise Appearance

Puts have been popular on Arrowhead Research Corp (ARWR)

Feb 23, 2015 at 1:51 PM
facebook twitter linkedin

It's a big day for drugmakers, and Arrowhead Research Corp (NASDAQ:ARWR) is no exception. The stock is up 7.7% at $7.93, on news the biopharmaceutical firm has begun phase 1 testing of its liver disease drug, ARC-AAT, with results expected sometime in late 2015. In the options pits, calls are crossing the tape at five times what's typically seen at this point in the day, and are outpacing puts by a nearly 3-to-1 margin.

Receiving notable attention is ARWR's May 9 call, where all signs suggest new positions are being purchased. By buying to open the calls, speculators expect ARWR to be sitting north of $9 at the close on Friday, May 15 -- when the series expires. Amid today's rally, delta on the call has jumped to 0.50 from 0.44 at last Friday's close, suggesting an increased probability of an in-the-money finish.

Shorter-term bulls are circling the March 8 call -- currently the most active option. The International Securities Exchange (ISE) confirms some buy-to-open action, with the speculators expecting ARWR to muscle north of $8 by expiration on Friday, March 20. ARWR peaked at $8.01 today.

Today's accelerated call activity marks a change of pace in ARWR's options pits. At the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 0.52 ranks in the 84th annual percentile. In other words, puts have been bought to open over calls at a faster-than-usual clip in recent weeks.

This skepticism toward a stock that's shed more than two-thirds of its value over the past 52 weeks is witnessed outside of the options arena, as well. In fact, short interest surged 17% over the past two reporting periods, and now accounts for 39.2% of the stock's available float. As such, it's possible that some of today's call buying -- especially at the out-of-the-money May 9 strike -- could be at the hands of Arrowhead Research Corp (NASDAQ:ARWR) shorts hedging against any additional upside.


Stop leaving money on the table with the same old broken options trading approach...

There is no options strategy that more perfectly capitalizes during earnings season better than this simple call and put buying strategy. Perfect for aggressive traders looking to recover their suffering portfolios so far in 2022. With the simplest possible options strategy, Schaeffer's team with 100+ years of options trading excellence, target 200% gains on every single trade. So many trades are being beaten down by the market, but don't be one of them! Don't waste another second... join us right now before the next trade is released! 

Schaeffer's Daily Bulletin Offer


Special Offers from Schaeffer's Trading Partners