Traders are betting that Orexigen Therapeutics will rebound from recent losses.
optionMONSTER's Heat Seeker system detected the purchase of 2,100 August 6 calls at the same second yesterday afternoon, almost all of them for $0.25. The volume was well above the strike's previous open interest of 1,121 contracts, so this is clearly a new position.
These long calls lock in the price where the stock can be purchased through mid-August no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, providing potentially significant leverage, but the contracts will expire worthless if shares remain below $.6 (See our Education section)
OREX slipped 0.37 percent yesterday to close at $5.45, near a support level that has held since mid-April. The pharmaceutical stock gapped down from the $7 level a month ago after the Food and Drug Administration delayed approval of the company's weight-loss drug. Shares had been trying to recover but fell back down with this week's broader-market declines.
Yesterday's total option volume in OREX was 40 percent higher than its daily average for the last month. Overall calls outnumbered puts by 7 to 1.
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