Arena Pharmaceuticals (ARNA) has seen a steady increase in options activity during the past two week heading into a June 27 PDUFA date for the biotech’s obesity drug lorcaserin. Optimism has been riding high and, after the 73.8 percent surge in shares on May 11 after an FDA committee voted 18-4 in favor of the drug, shares rallied another 83.6 percent through yesterday. The stock then hit a 52-week high of almost $12 per share this morning, before seeing a violent round of profit-taking and falling to a morning low of $7.80
ARNA is now down $1.72 to $9.96 on heavy volume of more than 20 million shares. 108,000 calls and 38,000 puts now traded in the name, which is 2.5X the daily average. Of that, 56 percent is in the July term and calls with strikes ranging from 10 to 17 are the most actives. The July term also has the most open interest totaling 38 million contracts. The largest increases in open interest over the past ten days have been in the July 11 and 15 calls. Meanwhile, implied volatility in ARNA options is up 24 percent and elevated at 220, but still below the levels seen prior to the May 11 FDA news, when IV in ARNA options had surged to nearly 400 percent. Wait until next week!
About the Author (Author Profile)
Frederic Ruffy is a well-known trader, writer, and strategist who has spent years educating investors and creating intelligent, insightful, unbiased market observations that are frequently cited by the Wall Street Journal and other financial publications. As senior analyst, Fred provides frequent and regular notes and daily updates for activity of interest.