Ariad Pharmaceuticals Options (ARIA): Unusual Trading Activity

| March 22, 2012 | 0 Comments

Ariad option activityOptions in biopharmaceutical company Ariad Pharmaceuticals (ARIA) experienced a large amount of unusual trading activity yesterday.

Ariad’s stock closed up 1.4% at $15.29, with options heavily skewed towards the bullish side.

Just after the opening bell, one option trader came in and sold 5,000 contracts of the May 11 strike put options for an average price of $0.15.  Remember, put sellers want the stock to remain above the strike price.

In this case, as long as Ariad remains above $11 per share by May expiration, this trader will be very happy keeping the $75,000 he collected in premiums.

Bottom line, this trader is a big fan of ARIA over the next few months!

And I tend to agree, as our tracking system estimates the probability of success at 93%.

In another non-related options trade in ARIA, there was a sale of over 2,000 contracts of the May 15 strike call options for $1.35.  This sale was simultaneously matched with the purchase of 2,000 shares of stock at $15.05.

Remember, this multi-leg trade was long stock and short calls.

In other words, someone is simply selling covered calls against ARIA’s stock…

Come May expiration, if ARIA is still trading above $15 a share, this trader will be obligated to sell his stock at $15.  The best part is that he also keeps the $1.35 premium he sold his calls for.

Overall, this represents an 8.6% gain in two months or a 52% annualized return!

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.

Yesterday’s heavy options trading activity came after the FDA’s Oncologic Drugs Advisory Committee’s meeting regarding ARIAD and Merck.

They ruled the treatment of metastatic soft-tissue or bone sarcomas will be taken into consideration when the FDA makes its decision shortly on the New Drug Application.  This is a big positive for the drug makers in their bid to get their new cancer drug approved faster.

And based on what some big option traders are telling us, it sure looks like it’s going to happen sooner rather than later!

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.

Tags: , , , , , , , , ,

Category: Unusual Options Trading Activity

About the Author ()

Marcus Haber is the co-editor of Options Trading Research and boasts well over a decade of real-life options experience. Learning from some of the biggest names in the business, Marcus has served as an Options Strategist for a number of firms and was also appointed to the Options Advsiory Board with Pershing, a branch of the Bank of New York.