Biotech bulls are turning to Mast

The bulls are running rampant in biotech today, and now even penny stock Mast Therapeutic is getting some love.

optionMONSTER's Heat Seeker monitoring program detected the purchase of more than 4,000 July 1 calls for $0.15 to $0.20. Volume is almost triple previous open interest at the strike, which indicates that new money was put to work on the long side.

These long calls lock in the price where a stock can be purchased, letting investors cheaply position for a rally. They can also generate significant leverage if shares move in the right direction. (See our Education section)

MSTX is surging 33.77 percent to $0.71 in midday trading. It peaked above $12 in early 2010, cratered in late 2011 and has been under $1 ever since. The shares have been rebounding in the last two weeks after reporting that nonclinical trials of its MST-188 compound produced positive results. It's also in the midst of beginning phase III trials of the product this year.

But the bigger story could be the broadly positive sentiment in the biotechnology/pharmaceuticals space. Just today, for instance, Alnylam Pharmaceuticals is surging more than 50 percent after receiving a big investment from Sanofi. There's also been bullish upside activity in names such as Xoma, Mylan, and Bristol-Myers Squibb.

Total option volume in MSTX is 30 times greater than average so far today, according to the Heat Seeker. Overall calls outnumber pus by almost 100 to 1.