By Jon "DRJ" Najarian, co-founder of OptionMonster.
NEW YORK -- Shares of Ziopharm Oncology (ZIOP) gapped higher this week, and option traders are betting on larger gains ahead.
OptionMonster's tracking systems showed heavy buying in the May 7 calls, including one big block of 3,500 contracts for 70 cents. Open interest was a mere 145 contracts coming into the session, so someone obviously believes that this $245,000 investment will yield big returns.
Calls lock in the price investors must pay to buy a stock. They can generate nice leverage in the event of a rally but will expire worthless if the shares don't rise above the $7 strike price by mid-May.Ziopharm came into the week as a $4 stock. Now, after a presentation at an industry conference and Phase III trials of Palifosfamide treatment on soft-tissue sarcoma looking extremely positive, shares are closer to $5. Palifosfamide belongs to a group of chemotherapy drugs called alkylating agents, which halt tumor growth by binding to cancer-cell DNA and interfering with its function. Full results are expected by the end of this quarter. Ziopharm shares ended Wednesday's session up 0.21% to $4.70. Calls dominated its option activity, outnumbering puts by a bullish 15-to-1 ratio. Najarian owns ZIOP call spreads.