OptionsHouse

Options Trading News

February 14, 2013  Thu 9:52 AM CT

DVAX: SEE CHART GET CHAIN FIND STRATEGIES
One investor is looking for Dynavax Technologies to come back from a brutal selloff last year.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 2,000 July 4 calls for $0.75 and the sale of an equal number of March 6 calls for $0.12. Volume was below open interest in the 6s, so there are two possible explanations of the activity.

One is that an existing position was rolled down in price and further out in time. That gives the investor a greater chance to profit, but for an additional cost of $0.63.

The more likely possibility is that both trades were opened as part of a bullish diagonal spread. In that case, the investor has locked in a purchase price of $4 through the summer while agreeing to sell the stock for $6 if it goes above that level during the next month.

In this case, should DVAX remain below $6 through March expiration, the trader can sell more calls at the higher strike to further reduce the cost basis. (See our Education section for more on how options can be used to manage trades.)

DVAX is down 0.25 percent to $3.21 in morning trading. It lost almost half its value on Nov. 16 after a Food and Drug Administration advisory panel voted against approval of its Heplisav hepatitis B vaccine. Since that drop, however, the shares have been trying to rebound.

Total option volume is twice the daily average so far in the session, with calls outnumbering puts by 51 to 1.
Share this article with your friends


Related Stories

DVAX

How one investor is playing Dynavax

September 14, 2016

A call spread is looking for a rebound in the drug developer, which has seen its shares plunge 24 percent just in the last month.

OptionsHouse

TRADING WEEKLY OPTIONS

The fastest money in the market
View full report »

Premium Services

Education & Strategy

Using spreads to minimize risk

Last week we discussed the risk vs reward profile of a debit call spread in Wells Fargo (WFC). This week we will run thru the risk vs reward of selling a credit put spread to achieve the same exposure of that debit call spread.

View more education articles »