Options Trading News

January 10, 2013  Thu 4:47 AM CT

Impax Laboratories has been rising this week after releasing a new generic drug, and traders are looking for the stock to break out of its recent range.

More than 8,000 February 22.50 calls traded in a strong buying pattern yesterday for prices ranging from $1.10 and $1.55, according to optionMONSTER's Heat Seeker tracking system. The volume was more than 9 times higher than the strike's open interest of 851 at the beginning of the day, showing that these are new purchases.

IPXL rose 1.44 percent yesterday to close at $21.86, continuing to move higher since launching a generic version of the Endo Health's Opana ER pain treatment last Friday. The pharmaceutical company gapped down from above $24 in late October after its last earnings release and has been trapped in a tight range between $19.50 and $22 ever since.

Yesterday's long calls, which lock in the price where traders can buy stock, are betting that IPXL will gain at least 8 percent by mid-February. Those options could be sold at a profit earlier if their premiums rise with any rally before then, but the contracts will expire worthless if the stock is below the $22.50 strike price at that time. (See our Education section)

Total option volume in Impax was 12,059 contracts yesterday, compared with a daily average of just 166 in the last month. Overall calls outnumbered puts by 10 to 1, a reflection of the session's bullish sentiment.
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As we continue to discuss the Greeks, we come to the first of the strike based Greeks called Gamma. Gamma is known as the second derivative, while delta is the first.

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