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July 13, 2012  Fri 11:27 AM CT

ELN: SEE CHART GET CHAIN FIND STRATEGIES
One investor apparently thinks that Elan will remain trapped in a range, even with earnings later in the month.

optionMONSTER's monitoring programs detected the sale of 20,000 October 13 puts for $2.30 and 20,000 October 16 calls for $2.05. Volume exceeded open interest at both strikes, indicating that new positions were initiated.

Known as a short strangle, the trade resulted in a credit of $4.35 which the investor will get to keep if the Irish drug maker remains between $13 and $16 through expiration. Gains erode outside of that range, turning to losses below $8.65 and above $20.35.

The activity is especially noteworthy because earnings will be released on July 25. Implied volatility has been surging higher ahead of the results, but today's straddle seller is wagering that the stock won't make a big move on the news. (See our Education section for more on market-neutral strategies that make money from the passage of time rather than a directional move.)

ELN is down 0.22 percent to $13.80 in early afternoon trading and has been grinding sideways all year. Overall option volume is 9 times greater than average so far in the session.
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The Strike-Based Greeks

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