Ariad Pharmaceuticals Options (ARIA): Unusual Trading Activity
Options in biopharmaceutical company Ariad Pharmaceuticals (ARIA) experienced a large amount of unusual trading activity yesterday.
Just after the opening bell, one option trader came in and purchased 2,600 contracts of the September $21 strike call options for an average price of $0.45.
And it’s easy to understand why…
Since early October 2011, ARIA has gained more than 155% in value. What’s more, the stock closed up again today by 1.0% to $20.50, with options heavily skewed towards the bullish side.
Remember, call option buyers want the stock to remain above the strike price.
In this case, as long as Ariad trades above $21.45 per share by September expiration, this trader will be very happy. After all, he has unlimited profit potential on his call options as long as the stock stays above this price.
Clearly, this trader is a big fan of ARIA over the next few months!
And I tend to agree. Our tracking system estimates the probability of making money on this trade at just over 45%.
But you’re probably wondering… why is this small biotech so hot right now?
For those of you who don’t know, Ariad Pharmaceuticals is a biotech company that focuses on the discovery and development of small molecule drugs for the treatment of cancer.
This stock has been in an uptrend for a year now, despite the fact that ARIA’s Oncology drug was rejected in March 2012 and then again in June of 2012.
This would normally lead you to assume the company would be getting taken out to the woodshed for a nice beating. However, that hasn’t been the case with ARIA.
You see, the biotech still has two major things working for them.
The first is that Ariad has realized a lot of the potential gains for Ridaforolimus from Merck already. This drug was rejected by the FDA, but ARIA still realized royalties from Merck over that time which helped their revenue stream.
Second, on July 30, 2012, Ariad submitted a New Drug Application for the use of its pan-Bcr-Abl kinase inhibitor, Ponatinib. This drug is used in treating patients with resistant or intolerant Chronic Leukemia and a form of Acute Lymphoblastic Leukemia.
Unlike Ridaforolimus, Ponatinib has performed well in clinical testing. In a pivotal Phase II trial, Ponatinib showed it is far superior to any other drug in the competitive landscape for this kind of treatment.
Simply put, Ariad is far from out of the “game,” and they have a lot going for them that can easily propel this stock much higher.
And that’s obviously why option traders are making bullish bets on this exciting biotech.
For more detailed information on unusual options activity and how you can profit from it, be sure to sign-up for our daily newsletter, Options Trading Research. It’s always 100% free and packed full of option trading ideas you can use immediately in your own portfolio. Click here to subscribe for free.
Safe Trading,
Marcus Haber
Category: Unusual Options Trading Activity
