When my son had a huge boil under his arm, it turned out that it was filled with the killer staph, MRSA. It also turns out that my (otherwise) great doctor used a traditional lab to process the test, which took a week to determine it was MRSA.

Cepheid (NASDAQ: CPHD) manufactures the equipment and test that takes just two hours to do the same thing -- and is better and cheaper than traditional tests. CPHD wins 90%-plus of all competitive bids and its test could be available in low-tech facilities, such as doctor's offices or nursing homes, next year.

The big catalyst for this stock, however, is that Medicare will stop paying for all hospital-acquired infections except MRSA in October. So institutions need a quick test if they are going to be reimbursed for treatment.

The stock has fallen from $30 to under $9. It's worth $20 - $22 to an acquirer.

Your best strategy for life-changing profits?

Buy the call options.

Next: Biotech Stock #4

Continue reading Biotech stock #3: Cepheid (CPHD)

Biotech stock #3: Cepheid (CPHD) originally appeared on BloggingStocks on Sat, 11 Jul 2009 14:30:00 EST. Please see our terms for use of feeds.

Last week Bank of America (NYSE: BAC) bought Countrywide Financial (NYSE: CFC). The deal benefits Bank of America in that it gets a big chunk of the US mortgage market and a nice tax write-off, while Countrywide gets saved from a deep mortgage mess and pending liquidity crisis.

What is interesting to options traders though is the option activity that happened in the days before the deal. The deal was widely reported on Friday 1/11/08. But the stock options tell a slightly different story. It appears as if there are some who got wind of this deal a little early.

Call options allow an investor to take on a levered position in the stock and make huge gains if the stock appreciates. In the days before the buyout the call options were extremely active and this is typical of insider trading on the news. If you look at the number of options trading on the day before the announcement and the number that were trading several days earlier, it is very apparent that some traders had wind that something was up. On 1/10/08, the day before the announcement 195,000 January call contracts traded hands. If you compare that to the volume of three days earlier there were only 13,000 January calls traded. That is a 14 fold increase in the daily number of January contracts trading.

Kevin Kersten is an Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and/or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about. Mr Kersten does not own or control BAC or CFC positions at the time of this writing.

Countrywide options active before BAC buyout originally appeared on BloggingStocks on Tue, 15 Jan 2008 11:44:00 EST. Please see our terms for use of feeds.

Earlier today I noted some options buying in Time Warner, Inc. (NYSE: TWX) DEC $20 calls and how the price of the stock has been stable because of a general lack of sellers. At the time we were just on track for another day of average volume and a slight uptick.

Then the 11:30 AM buying frenzy came. We started seeing big volume and a lot seem to be block purchases. At 3:22 PM EST the stock has traded north of 33.3 million shares, well above the 25.5 million shares on an average trading day. Now the shares are up 2.1% at $20.40. While the high on the day was $20.52, this will be another recent new high close, barring anything unexpected. The previous 52-week high was $20.13.

We also saw more options activity in the name too. The December $20 calls have now traded more than 14,000 contracts -- and that 10,000 contract buyer I wrote about earlier today is actually up almost 50% since this morning! The purchases were for $0.45 earlier and the last print seen was $0.65. Even the JAN 07 $22.50 calls saw more than 17,700 contracts trade and almost all were speculative buys more likely than not. This volume also is far too much and at too close of a time to be attributed only to options activity the day before expiration.

Could this be short covering? It is possible, but honestly most short covering goes into an event or ahead of an event. This generally looks like block buying to me.

We'll have to see if any additional stealth news comes out of if there are any upgrades that would have accounted for the sudden trading volume and options volume. So far this will be another near-term high in the stock.

Buying frenzy for TWX today originally appeared on BloggingStocks on Thu, 16 Nov 2006 15:30:00 EST. Please see our terms for use of feeds.

Time Warner call options speculation originally appeared on BloggingStocks on Thu, 16 Nov 2006 14:15:00 EST. Please see our terms for use of feeds.