Taking Long Position In Cell Therapeutics Leap Call Options (CTIC)

Here is a good play for individuals looking for a large risk to reward trade. I only would recommend risking a small percent of a portfolio because this is going to be a trade that either makes or breaks. It also is packaged with a lengthy time frame. The bet we are going to place will be on Cell Therapeutics, Inc. (Nasdaq: CTIC).

Cell Therapeutics is pending FDA approval for its drug Pixantrone that targets non-Hodgkin's lymphoma. The approval date is going to be April 23, 2010 and we think that it could gain approval and explode. The company drastically cut its net loss in 2009 by 42%. If it gets approval, I think CTIC will become not only profitable, but be a buyout target for north of $10 per share.

Options Play
We are going far out into the future buying $1 strike calls in January 2012 expiration. This gives us 700 days until expiration. There is a lot of time value in this option. Right now they are trading for $0.40 on the ask and have a 67.36% to touch by expiration. Furthermore, if it does at least touch, I think it would be on news of FDA approval, which means this stock could definitely be primed for the buyout. A move to $10 per share would be a $9.60 per share return on the initial $0.40 per share investment, or a whopping 2400%.

If it does not get approval, its pipeline of other drugs is weak but still is a flying chance for something else good to happen to the stock in the next 700 days. Although it is a high risk play, I like the potential reward on these options on Cell Therapeutics (CTIC).