Options Trading News

July 16, 2013  Tue 4:14 AM CT

A long-term call spread dominated yesterday's option activity in Achillion Pharmaceuticals.

optionMONSTER systems show that 53,781 ACHN options changed hands in the session, compared to a daily average of just 3,445. Almost all of that action is in a January 2015 call spread.

A trader bought 25,000 of the 7.50 calls for $2.64 and sold the same number of the 20 calls for $0.39. The relative open interests were 49 and 60, so this is a new call spread. (See our Education section)

The postition cost the trader $2.25, which is the most that can be lost if ACHN is anywhere below $7.50 at expiration in 18 months. The maximum profit would be realized if shares are above $20.
ACHN was up 1.15 percent to close at $7.03 yesterday. The drug developer has been working its way higher since gapping down on July 2. Shares hit a high of exactly $20 in early 2007.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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