By David Russell of OptionMonster
NEW YORK -- Halozyme Therapeutics (HALO) spiked higher Wednesday after announcing the appointment of a new CEO, and traders made a quick profit on the move.
OptionMonster's trading scanners detected the bullish action right after the market opened with a print of 5,000 January 15 calls purchased for the ask price of 45 cents. The buying continued throughout the session, as OptionMonster co-founder Jon "DRJ" Najarian pointed out on CNBC's Halftime Report Wednesday, and finished with more than 13,800 contracts priced all the way up to $1.35, a gain of exactly 300%. Open interest in the name was a mere 279 contracts at the start of the day, clearly showing that new positions were initiated.
Long calls lock in the price where traders can buy a stock, allowing them to cheaply establish an upside position with limited risk. The contracts can provide major leverage if a rally ensues -- as seen in the tripling of premiums Wednesday -- but can also expire worthless if shares remain below the strike price.
Halozyme shares surged 16.6% Wednesday to close at $14.75, just 2 cents off their session high. The drug developer closed the previous session right at its 50-day moving average.
Total option volume in HALO topped 29,600 contracts Wednesday, 19 times its daily average for the last month. Overall calls outnumbered puts by a bullish 11-to-1 ratio.
Russell has no positions in HALO.