OptionsHouse

Options Trading News

February 8, 2013  Fri 2:45 AM CT

AUXL: SEE CHART GET CHAIN FIND STRATEGIES
Auxilium Pharmaceuticals has been range-bound since falling sharply last year, and one trader is betting that shares will not collapse to multi-year lows.

A block of 5,000 September 12.50 puts was sold for $0.60 yesterday, according to optionMONSTER's tracking systems. Open interest in the strike was just 51 contracts before the session began, so this is clearly a new position.

The put seller is counting on the stock stay above $12.50 through expiration in mid-September, a level not seen since March 2007. If it falls below that strike price, the trader will face the obligation to buy shares at an effective price of $11.90 when the credit from the put sale is included. (See our Education section)

AUXL fell 1.61 percent yesterday to close at $18.30, just below its 50-day moving average. The drug maker had been trading above $25 in early October but gapped down a month later after missing third-quarter estimates, and shares have been trapped between about $17.50 and $19.50 since then.

Yesterday's put selling made up almost all of AUXL's total volume of 5,082 contracts, which was 4 times its daily average in the last month.
Share this article with your friends


OptionsHouse

Premium Services

Archived Webinar

Education & Strategy

Real vs. Synthetic

We now know that there are two ways of creating a call position, a put position, and a stock position. We can simply use the actual real security or we can recreate it synthetically. We can create these positions in both long and short forms and this ability sets up an interesting scenario--an arbitrage!

View more education articles »