Calls double bet on Acadia Pharma
Mike Yamamoto | [email protected]
optionMONSTER's Heat Seeker system detected the sale 2,000 March 6 calls for $0.60 and, at the same second, the purchase of 4,000 April 7 calls for $0.47. Volume was below the previous open interest in the March options but above it in the April contracts, indicating that a position is being rolled forward to a higher strike.
The trader is closing the nearer-dated calls, which are now in the money and expire at the end of next week, and is using the proceeds to purchase twice as many of the April options. This gives the investor another month to stay in the trade while raising the strike price by $1 in a reflection of the stock's recent ascent.
ACAD rose 0.46 percent yesterday to close at $6.54. The stock had drifted lower since hitting a 52-week high of $6.88 on Jan. 28, but it has been climbing for more than a week.
The drug maker gapped up from $2.30 in late November after reporting strong results in Phase III trials of its pimavanserin treatment of Parkinson's disease psychosis. The company is scheduled to release fourth-quarter and 2012 results on Tuesday after the close.
The April calls bought yesterday lock in the purchase price for the stock at $7 no matter how high it might rise. These options can provide significant leverage if ACAD rallies but will expire worthless if it remains below that strike price through mid-April. (See our Education section)
Overall option volume in the name surpassed 27,000 contracts yesterday, 7 times its daily average in the last month. Only 426 puts changed hands, a reflection of the session's bullish sentiment.
It was the second time in about a week that Acadia had seen upside option trading. An investor opened a long-term bullish call spread in the name on March 1.