Arrowhead Research Corporation (ARWR) is a biopharmaceutical company developing targeted RNAi therapeutics. The Company is leveraging its drug delivery technologies to develop drugs based on the RNA interference mechanism that silences disease-causing genes. ARWR is currently trading around $6.09 in a 52 week range of $5.47 – 27.63. The company’s stock has been underperforming the market this year with shares decreasing 43.22% year to date.
Today, a trader bought 1000 ARWR Oct14 11.0 Puts for $0.55. This order involves this trader laying out $55,000 in total premium. While this is not necessarily an unusually large bet, shares of ARWR fell 40% right after these puts were purchased. The company announced today that data from the ongoing Phase 2a study of ARC-520, its candidate for the treatment of chronic hepatitis B (HBV) infection, was disappointing, leading shares to tumble as investors pulled out of the biotech name. These contracts have increased over 10X in value in just a few hours, reaching as high as $5.40 as the stock continues to sell off in today’s session.
Unusual Option Activity:
We define unusual option activity as large block trades that represent a large percentage of daily option volume. The block trade is considered “unusual” if the option volume is above the average daily volume over the past 22 days. At KeeneOnTheMarket.com we scan and analyze order flow from all of the major options exchanges in order to identify any unusual option activity.
Analyzing unusual order flow gives traders a window into what the positions that large institutional players have. The majority of unusual option activity can be traced back to hedge funds, mutual funds, and other large institutions. Knowing where these institutions are placing their bets can be hugely advantageous for any trader. These institutions have informational and technological advantages that the average trader doesn’t have, and the amount of time and analysis that goes into every one of their trades is substantial. We offer this service through our 7 hour daily LIVE trading room http://bit.ly/1usQnKR or through the only Unique Unusual Options Activity Scanner: http://bit.ly/1sCSaws
Order flow can however at times be deceiving. One might logically thing that a large block buyer of calls is bullish on the underlying. This is not always the case. Remember that a large number of participants in the equity options market are hedgers. Long calls are a hedge against short stock, and long puts are a hedge against long stock. With this in mind we have developed a 7 step trading plan that helps filter out unusual option activity that will not provide actionable trade setups. It is by using this plan that we are able to identify the most significant unusual options activity trades every day.
The Trade:
Buying the ARWR Oct14 11.0 Puts for $0.55
Risk: $55 for every 1 lot
Greeks of these Trade:
Delta: Short
Gamma: Long
Theta: Short
Vega: Long
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