Bulls take a dose of Achillion Pharma
David Russell | [email protected]
An investor bought 2,000 September 10 calls for $1.60 and sold 2,000 September 15 calls for $0.45, optionMONSTER's Heat Seeker system shows. Volume was more than triple open interest at each strike, indicating that these are new positions.
Owning calls locks in the price where investors can buy shares in the drug developer, while selling them forces an exit if a certain level is reached. In the case of yesterday's trade, the investor will collect $5 if ACHN goes to $15 by expiration. Based on the $1.15 outlay, that would translate into a profit of 335 percent. (See our Education section for more on the strategy, which is known as a bullish call spread.)
ACHN rose 1.61 percent to $8.84 yesterday. The stock is up more than 8 percent just since the weekend, when a deep pullback to its 200-day moving average caught the attention of our proprietary researchLAB screening tool.
The company may have huge potential because it's working to develop treatments for hepatitis C. Yesterday's bullish trade was probably a bet for good news from several key trials in the second and third quarters. Achillion is also presenting at Cowen's Annual Health Care Conference today and the Barclays Global Healthcare Conference on March 13.
Total option volume was 7 times greater than average in the session. Calls outnumbered puts by almost 4 to 1.
(A version of this post appeared on InsideOptions Pro yesterday.)