Options Trading News

December 10, 2013  Tue 3:47 AM CT

A large trader is betting that Questcor Pharmaceuticals will bounce next year.

optionMONSTER's tracking systems detected the purchase of 5,000 April 60 calls for the ask price of $6.40 and the sale of 5,000 April 40 puts for the bid price of $5.60. Volume was above the previous open interest in each strike, indicating new activity.

This combination trade is highly bullish, as a rally would boost the premiums of the long calls while lowering the value of the puts sold short. But the opposite would occur if the stock drops, and the trader would be on the hook to buy shares if they fall below the $40 level. (See our Education section)

QCOR fell 1.79 percent yesterday to close at $51.69. The drug developer has continued to decline since gapping down from the $70 level after its last earnings report on Oct. 29, when the company disclosed that more regulators were joining an ongoing investigation into its marketing practices.

Management is scheduled to present at the Oppenheimer 24th Annual Healthcare Conference in New York tomorrow. Total option volume in the name was just shy of 20,000 contracts yesterday, more than quadruple its daily average for the last month. 
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The art of trading

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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