Option traders eye biotech stocks after ImClone news

By Doris Frankel

CHICAGO (Reuters) - Investors scrambled on Thursday for options on several pharmaceutical and biotechnology stocks, with many betting on future gains in the sector following news of a proposed buyout of ImClone Systems.

Earlier in the day, Bristol-Myers Squibb Co (BMY.N) offered to buy out the remaining stake in biotech partner ImClone Systems Inc IMCL.O.

News of the deal triggered a flurry of option activity in

Amgen Inc(AMGN.O), Onyx Pharmaceuticals Inc (ONXX.O) and Amylin Pharmaceuticals Inc (AMLN.O), said option strategist Frederic Ruffy at Web site WhatsTrading.com.

All these stocks saw heightened activity in their call options, enabling investors to buy their underlying shares at a given price and time. The volume far outstripped their respective puts, which convey the right to sell the stock at a predetermined price and time, according to option analytics firm Trade Alert.

"We are seeing a similar pattern in all of these stocks in which investors are buying at-the-money and just out-of-the-money calls in a speculative fashion with the expectations that the entire sector is about to turn very bullish," said Joe Kinahan, chief derivatives strategist at online brokerage thinkorswim Inc.

Some players bought upside calls on speculation about which company might be next, Ruffy said.

The unsolicited offer for ImClone marks the latest in a spate of pharmaceutical-biotech deals, including Roche Holding AG's (ROG.VX) recent $43.7 billion bid for the part of Genentech Inc DNA.N it doesn't already own.