Options Trading News

November 27, 2012  Tue 2:14 AM CT

Biotech company Exelixis slipped yesterday, and one trader sees limited upside potential for the near term.

optionMONSTER's scanners detected the sale of more than 5,400 May 6 calls, led by a block of 4,320 that went for $0.75. Open interest in the strike was just 194 contracts at the start of the session, so this is clearly a new position.

The calls could have been sold naked in a trade that has an initial bearish bias but could profit with EXEL anywhere below $6.75 at expiration in mid-May. It is also possible that the options were traded against an existing long position in a covered call position, which would be bullish up to the strike price but would not partake in any stock gains above that level. (See our Education section)

EXEL was down 1.33 percent to close the session at $5.20 after gaining in the previous five sessions. Shares carved out their 2012 range in the last week of July and first of August, hitting $6.95 then quickly falling to lows and long-term support at $4.25.
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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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