Thursday, March 20, 2014

Mast Therapeutics (MSTX) - Update: Huge Call Buyers Step in Again; A Signal or Just Noise? You Decide.

MSTX is trading $0.82, up 10.5%. The Symbol Summary is included below.

Provided by Livevol

Mast Therapeutics, Inc., formerly ADVENTRX Pharmaceuticals, Inc., is a development-stage company biopharmaceutical company focused on developing product candidates.

This is a follow up to an article I posted on February 5th (so ~ six weeks ago).  You can read that article here:
Mast Therapeutics (MSTX) - Huge Call Option Buyers in Tiny Bio-tech; A Signal or Just Noise? You Decide.

This is an order flow note on a penny bio-tech with 13 employees and a grand total of $0 (zero) of revenue.  So, why the note?... Here's why...

First, today's Stats Tab:

Provided by Livevol

Note that 7,910 calls have traded already today on a total daily average of just 1,366.  I note also that 0 (zero) puts have traded.

But let's turn back the clock to February 5th, the Options Tab:

Provided by Livevol

Note the massive open interest (OI) that accumulated in the Jul 1 calls: 21,140.  Note also how large that number is to any other OI number on any other strike in any other expiry,

Those calls opened huge on Jan 13, 2014. Here's that OI chart:

Provided by Livevol

Now, let's turn to the Options Tab from today:

Provided by Livevol

I note two phenomena:
1. The OI has grown from 21,000 to now over 28,000.
2. 6,504 more calls have traded today on that same strike.

But there's a tricky thing going on in those calls today.  Let's turn to the Time & Sales Tab.  I have included only trades > 400 contracts.

Provided by Livevol

So here's where the "tricky" part comes in.  We can see the 427 lot (in green) was trade on the offer.  OK, that's a purchase if you dig deeper.  But what about, say, the next trade, the 500 lot in red?

That traded on the bid -- so it's a sale right?  A close of the massive bet put on earlier?  Actually, not necessarily.  Let's look at the level II quotes at the time of the trade:

Provided by Livevol

Note that the NBBO was $0.10x$0.20 and then someone went $0.15 bid for 500 on NASD.  That bid was hit, but that is buyer initiated which means that is a long position.  All the rest of those large trades look similar. We'll know tomorrow for sure if the trades in totality add to OI, but my best guess is yes.  This looks like more buying in those same calls to almost preposterous levels.

So, yes, this is some large speculating, but in a firm that has zero $ revenue in a stock price that is itself an option, and now we see growing interest in the calls in July.  I do note that the OI in the Apr $1 calls actually looks short... which is odd...

In any case, this is pure gamble to any of us outsiders that chose to participate, and the gamble is that someone who is an "insider" has shown their hand.  As for me, I have already purchased a few of those calls, but this does occur in bio-techs and quite often it's much a do about nothing... time and money lost.

But then again... sometimes it isn't...

This is trade analysis, not a recommendation.

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