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.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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