Ziopharm Bulls Bet on Explosive Move

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.

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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