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

by Alex Eppstein

Published on Jul 29, 2016 at 2:00 PM

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.

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