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Nektar Bulls Fight Through Pain

By Pete Najarian, co-founder of OptionMonster

NEW YORK ( OptionMonster) -- Nektar Therapeutics (NKTR - Get Report) has some potentially high-value drugs in its pipeline, and bullish option traders are stepping in.

Monday's activity focused on the February 5 calls, with several large blocks bought for 60 cents as investors positioned for a rally, according to OptionMonster's real-time tracking systems. About 4,000 of those options traded against previous open interest of just 53 contracts at that strike, so these are new positions.

The company has a robust R&D pipeline including treatments in oncology, pain, and other areas. Early last month, after Nektar announced progress in tests involving an experimental drug for chronic pain, traders were focusing on the February 7 calls.

The stock hasn't performed well since then and dropped another 8.66% to $4.38 Monday. Short interest is fairly high, and those bears have been rewarded.

Now the bulls are positioning for the shares to reach at least $5.60 -- the $5 strike price plus the 60 cents premium paid for the February 5 calls Monday -- by expiration on Feb. 17. That would be a gain of nearly 28%, the point at which the calls would start to become profitable.

Nektar is scheduled to report earnings results on Nov. 3.

Najarian has no positions in NKTR.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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