ZIOPHARM Oncology Inc. (ZIOP) Dips Despite Promising Drug Data

Even after a drug data win, ZIOPHARM Oncology Inc. (ZIOP) is dropping into the red, and ZIOP options volume is accelerated

Nov 17, 2016 at 1:30 PM
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ZIOPHARM Oncology Inc. (NASDAQ:ZIOP) is struggling today, despite a drug data win for the biotech stock. Earlier, ZIOP announced that its Ad-RTS-hIL-12 showed survival benefits for patients with recurrent brain cancer in clinical tests, and it plans to initiate trials to treat pediatric brain tumors, as well. After enjoying a pre-market rally of more than 20%, ZIOP now finds itself in the red, and the stock's options are trading at an accelerated clip.

ZIOP shares are currently down 0.3% at $6.85. The stock has managed to recover more than 34% since hitting its annual low of $4.45 in late July, though the shares were recently rejected by their 320-day moving average, after touching this trendline for the first time since early March. However, the stock -- which is still off 46% since notching an annual high last November -- could find a potential ally in the recently conquered 200-day moving average.

ZIOP 161117

ZIOP short sellers are likely breathing a sigh of relief that the equity's pre-market gains have thus far failed to materialize. ZIOP's short interest is up 8.9% over the last two reporting periods, and shorted shares now account for 38.1% of ZIOP's float. These shorted shares would take over 23 days of trading -- nearly five weeks -- to cover, at ZIOP's average daily volume.

In the option pits, call buying has been heating up, as ZIOP's 50-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows 45 calls bought to open for every put over the last 50 days of trading -- a reading that sits in the 95th percentile of ZIOP's annual range. However, some of the recent call buying -- particularly at out-of-the-money strikes -- could be attributable to shorts seeking an options hedge.

Specifically, ZIOP's top front-month open interest position is the November 6 call, with notable open interest at the overhead November 7 and 8 calls, all of which expire at tomorrow's close. By contrast, ZIOP's December open interest is relatively light, and the expiration of several overhead calls tomorrow could remove some of the options-related barriers for ZIOP.

Today, ZIOP options volume is running at 1.5 times the average intraday pace, with calls outnumbering puts, 4,900 to 1,400. ZIOP's option volume is light on an absolute basis, with just 1,386 puts crossing the line, compared to 4,578 calls. Drilling down, potential spread activity could be going on a the January 2017 8-strike call and put -- the most active options thus far -- while potential buyers may be scooping up the December 7 call to bet on an extended short-term surge for ZIOPHARM Oncology Inc, (NASDAQ:ZIOP). 

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