Options Trading News

December 13, 2012  Thu 1:47 AM CT

Acadia Pharmaceuticals continues to see high volatility, but one trader apparently believes that the stock won't collapse through the first half of next year.

optionMONSTER systems show that 4,950 June 3.50 puts were sold for $0.38 yesterday. There was no previous open interest in the strike, so this is a new position.

The put seller is betting that ACAD will hold above $3.50 through mid-June 2013. The trader gets the option premium for taking that risk but faces the obligation to buy shares if they are below that strike price at expiration. (See our Education section)

ACAD jumped 13.09 percent to close at $5.01 yesterday. It dipped toward $4 in the first two days of the week but is back to levels from early last week. Shares gapped up from $2.30 to above $6.50 on Nov. 27 with positive Phase III trial data on its Pimavanserin treatment for Parkinson's disease psychosis.
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The covered call and unhedged risk

I have written a few things on the Covered Call Strategy over the last two weeks. Please understand that those two previous articles plus this one do not constitute a proper, fully in-depth lesson on the Covered Call Strategy like we have in our classes at Option Monster Education. I have picked out a few topics that I believe were worth noting and today I am going to add the final one.

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