Sponsored By:

Phase Forward (PFWD)

January 21, 2009

Dear Fellow Options Traders,

Phase Forward Inc. (PFWD) is a provider of software to the clinical trial and drug safety monitoring industries. Its customers are biotechnology, pharmaceutical and medical device firms. Phase Forward serves sectors that are more insulated from the financial crisis.

During the past three trading sessions, options investors have been buying the PFWD Feb 15 Calls (UTOBC) to the tune of 1,000 contracts per day. The open interest of the Feb 15 Calls is now 3,000 contracts, which represents almost 84% of all open interest. The call buying at the February $15 strike is unusual and significant.

The company is scheduled to report earnings on Feb. 5, and the earnings report will most likely determine the success of this options trade.

Generally, we shy away from earnings-report-driven outcomes but the option activity in this case is so strong it is impossible to ignore.

However, because it appears to be an earnings-report-driven option situation, we recommend only investing a half position in the PFWD Feb 15 Calls (UTOBC) for $1.30 or less.

Have a great day trading.


Nick Atkeson and Andrew Houghton
Editors
Options Trader