Options Trading News

October 4, 2012  Thu 3:16 AM CT

Shares of Infinity Pharmaceuticals posted its highest close since April 2004 yesterday, and one trader is betting that the stock will hold its recent gains.

INFI was up 3.52 percent to close at $24.11. The drug developer has been climbing since the end of January, when it fell to $6 and based there.

optionMONSTER's systems detected a block of 2,500 November 20 puts sold for the bid price of $0.65. Then, exactly an hour later, a block of 2,000 was sold for the same price with the stock a few pennies higher. The volume dwarfed open interest in the strike of just 48 contracts at the beginning of the day, clearly indicating new activity.

The put selling is a bet that INFI will remain above $20, a level it broke through just three weeks ago, through the November expiration. The trader is also showing a willingness to buy shares on a pullback below $20, though the effective purchase price would be $19.35 including the credit from the put sale. (See our Education section)
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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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