Bulls Target Sequenom on Test Optimism

OptionMonster co-founder Pete Najarian provides options picks Monday, Wednesday and Friday in TheStreet.com's Deep in the Money Calls newsletter.

David Russell, reporter for OptionMonster.

SAN DIEGO (TheStreet) -- Traders are making bullish bets on genetic analysis firm Sequenom(SQNM Quote), expecting positive news about a Down Syndrome test that caused the shares to tank in late April.

Sequenom rose 12% to $5.91 in afternoon trading with above-average stock volume. Option traders targeted the nearest-month calls, piling into the September 6 and the September 7.50 strikes.

Volume totaled 8,524 and 5,109 respectively in each. The activity was below existing levels of open interest, but the transactions were skewed heavily toward purchases.

Sequenom lost 75% of its value on April 30 after announcing that the launch of its SEQureDX test would be delayed because employees had mishandled data. The announcement caused several downgrades and undermined the credibility of company, which gapped lower again Aug. 7 on a weaker-than-expected profit report.

With rumors flying that SEQureDX data will be released soon, investors are betting that the stock will move in the next four weeks. Most of the volume in the September 6 strikes priced in the range of 50 cents to 80 cents this morning, while the September 7.50 calls changed hands mainly for 35 cents to 40 cents, according to OptionMonster's tracking programs.

Some investors sold the September 9 calls for 15 cents to 25 cents to earn premium. Overall options volume in the name was almost twice average levels, with calls outnumbering puts by 10 to 1.

-- Reported by David Russell of OptionMonster in New York.

Follow TheStreet.com on Twitter and become a fan on Facebook.