Market News

January 18, 2013  Fri 2:45 AM CT

One investor in Aegerion Pharmaceuticals apparently prefers to use the leverage of options rather than trade common stock.

Our Heat Seeker monitoring system detected the purchase of 3,000 February 25 calls for $2.90 and the sale of an equal number of January 25 calls for $2. Volume was below open interest in the January contracts, indicating that an existing long position was closed and rolled forward in time.

AEGR closed at $26.80, so those options are in the money. If the investor hadn't adjusted their position, the January calls would have exercised to buy shares at the close today. Rolling the trade to avoid that for an incremental cost of $0.90.

In return for that cost, the investor has an additional month of significant leverage. The calls have a delta of more than 0.70, so they'll appreciate by at least $0.70 for every $1 that AEGR climbs. A 12 percent move in the share price, for instance, would almost double their money. (See our Education section)

Total option volume was more than twice the daily average in AERG, which has roughly doubled since October. Calls outnumbered puts by a bullish 200-to-1 ratio.
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