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October 7, 2011  Fri 12:20 PM CT

CELG: SEE CHART GET CHAIN FIND STRATEGIES
Shares of Celgene are near multi-year highs, but option traders apparently believe that resistance levels will hold.

CELG trades at 63.11, down 0.4 percent. The biopharmaceutical company's stock hit a 52-week high of $65.86 on Sept. 20, which is resistance going back for at least three years. Shares have been on the rise since plunging to support at $52 in early August.

More than 5,000 November 65 calls were sold today against open interest of 1,259 contracts, according to optionMONSTER's systems. The largest block of 3,127 went for the bid price of $2.15.

We have seen a considerable amount of call selling in institutional size the last two days. It appears that traders are trying to capture high volatility premiums but don't see equities continuing the current rally.
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Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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