Options Trading News

September 27, 2013  Fri 3:16 AM CT

A trader is betting that biotechnology company InterMune will spike higher in the next seven months.

optionMONSTER's Heat Seeker system detected the purchase of 2,000 April 15 calls in one print that went for $3.50. Open interest in the strike was just 111 contracts before the trade appeared, showing that this is clearly a new position.

These long calls lock in the price where the stock can be purchased through mid-April 2014 no matter how far it might rise. They could be sold earlier at a profit if premiums gain with a rally before then, but the contracts could also expire worthless if shares don't climb far enough. (See our Education section)

ITMN gained 1.84 percent yesterday to close at $14.97. The drug developer spiked higher after reporting second-quarter results on July 24 but has been trapped between $14 and $15.50 since early August.

Total option volume in ITMN yesterday was 5.5 times its daily average for the last month. Overall calls elipsed puts by almost 2 to 1.
Share this article with your friends



The fastest money in the market
View full report »

Premium Services

Archived Webinar

Education & Strategy

The covered call and unhedged risk

I have written a few things on the Covered Call Strategy over the last two weeks. Please understand that those two previous articles plus this one do not constitute a proper, fully in-depth lesson on the Covered Call Strategy like we have in our classes at Option Monster Education. I have picked out a few topics that I believe were worth noting and today I am going to add the final one.

View more education articles »