Najarian Stake Brings Out Merrimack Pharmaceuticals Inc (MACK) Option Bulls

High-profile trader Jon Najarian added Merrimack Pharmaceuticals Inc (NASDAQ:MACK) to his model portfolio

Jul 29, 2016 at 2:00 PM
facebook twitter linkedin

Merrimack Pharmaceuticals Inc (NASDAQ:MACK) stock and options are heating up, after CNBC's Jon Najarian added the biotech stock to his model portfolio (subscription required). At last check, MACK stock has tacked on 3.4% at $5.80, while its call options are crossing at six times the expected intraday clip.

Looking more closely, the most active MACK strike is the August 6 call. It looks like some options traders may be purchasing new positions, hoping the biotech stock can topple the out-of-the-money strike by the close on Friday, Aug. 19, when the front-month contracts expire.

It's worth noting that MACK hasn't closed a week north of $6 since June 17. It's also worth noting that the shares are currently battling their descending 40-day moving average, which has been ushering them lower for the past few months.

But, at the end of the day, next Thursday night's earnings report could go a long way toward determining whether or not MACK can muscle north of $6 by August expiration. The stock's recent earnings history doesn't look too promising. In the session subsequent to the biotech's early May earnings report, the shares dropped 8.4%.

Today's call buyers aren't the only ones eyeing a post-earnings breakout for MACK. During the past four weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), over 2,500 calls have been bought to open versus zero puts.

There's one major caveat, however: One-fifth of Merrimack Pharmaceuticals Inc's (NASDAQ:MACK) float is sold short, representing roughly three weeks of trading activity, at the stock's usual volumes. In other words, some of the recent call buyers may actually be short sellers in disguise, hedging their bearish stock positions via options insurance.

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.


If you are not making money with options, you aren’t buying options like this…

There is no options strategy that more perfectly approaches trading the fastest moving and most volatile stocks available in the marketplace than this one. In fact, there is no strategy that better utilizes put options for optimal returns and a real trading edge over other traders in the exact same market. New options traders fail out at an incredible rate without proper trade research, execution timing, and option picking. Capitalize on Schaeffer’s 100+ years of options trading excellence with the most coveted product launch in company history. Don't waste another second... join us right now before the next round of trades are released!

Schaeffer's Investment Research Master Portfolio Trial


Special Offers from Schaeffer's Trading Partners