OptionsHouse

Options Trading News

December 30, 2011  Fri 12:16 PM CT

KERX: SEE CHART GET CHAIN FIND STRATEGIES
Keryx Biopharmaceuticals is bouncing today, and one investor is using an unusual strategy to ride the move.

optionMONSTER's tracking programs detected the sale of 2,000 February 3 puts for $0.65. There was no previous open interest in the strike before the trade occurred, indicating that this is a new position.

KERX is up 8.4 percent to $2.58 in early afternoon trading, making the puts in the money. Their value will move in the opposite direction as the shares and, because this is a short-term play, the trader will profit if the stock pushes higher.  

The effective entry price is $2.35 because of the credit earned, so the position would make money even if KERX holds its ground. The strategy is interesting because it allows the investor to manage a long position in the drug developer without having to time precisely their entry point.
(See related column by CHris McKhann)

Overall option volume in the name is about triple the daily average so far today.
Share this article with your friends


OptionsHouse

Premium Services

Education & Strategy

Market Level Making You Nervous, Huh? Part 3

In last week's article, we discussed how important the extra cash you save by using the Stock Replacement Strategy over buying the actual stock is! That extra cash in our account instead of being unnecessarily tied up in a stock position allows us to buy the puts we would need to protect our downside in the case of a major sell-off.

View more education articles »