Call buyers stampede into Celsion

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Maybe the world hasn't ended for Celsion after all.

The developer of cancer drugs got hammered in late January, cratering from over $8 to less than $1 after announcing that its lead compound failed in a late-stage trial. Its shares ground sideways for months after the news but have been rallying in the last week.

Then yesterday it added another 39 percent to $1.59, and call buyers were all over the stock.

optionMONSTER's Heat Seeker monitoring program found especially heavy activity in the January 1.50s for $0.25 and $0.30. More than 13,000 contracts changed hands, almost quadruple the previous open interest at the strike, indicating that these are new positions.

Those trades locked in a $1.50 purchase price on the company through early next year no matter how far it might climb by then. Given the cheapness of the calls, they could provide huge leverage if the stock rallies. For instance, a return to $3--a double in the stock price--would result in profits of some 500 percent. Using the calls also limits the amount that traders can lose if it drops. (See our Education section for more on how to manage risk with options.)

It's not clear what triggered the recent buying, but the company announced receiving more patents related to its drug, ThermoDox. One writer following it at Seeking Alpha , who accurately predicted the current run-up, attributes the move to a short squeeze or potentially positive news.

Overall option volume was 25 times greater than average in CLSN yesterday, with calls accounting for a bullish 95 percent of the total.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: CLSN

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