OptionsHouse

Options Trading News

April 18, 2013  Thu 10:55 AM CT

ACAD: SEE CHART GET CHAIN FIND STRATEGIES
Acadia Pharmaceuticals has been explosive, and one investor is using options to smooth the ride.

Our Heat Seeker monitoring program detected the purchase of 30,000 January 2015 12 calls for $4.04 and the sale of an equal number of January 2015 15 calls for $2.64. Volume was below open interest in the 12s, so there are two possible explanations of the activity.

One is that he or she owns shares and had previously sold the 12s as part of a covered call strategy. He or she may have then closed that position and rolled it to the higher strike, in the process raising their eventual sale price by $3.

Alternatively, both halves of the trade may have been opened, in which case it was a bullish call spread with a maximum potential profit of 114 percent on a move to $15. Either way, they paid $1.40 and see shares pushing above $12 and toward $15 over the long-term. (See our Education section.)

ACAD is down 1.95 percent to $12.08 in midday trading. The pharmaceutical company is up more than 700 percent in the last year amid strong results for its Pimavanserin Parkinson's drug.

Total option volume is 7 times greater than average in the stock so far today, according to the Heat Seeker. Calls outnumber puts by more than 300 to 1.
Share this article with your friends


OptionsHouse

Premium Services

Upcoming Webinar:

Using Options For Income

http://bit.ly/1nY1OKA

Jon Najarian and Adam Mesh of Options Wealth Machine discuss a detailed strategy utilizing credit spreads to generate income, and how any level of trader can use this simple trading technique.

Education & Strategy

Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

View more education articles »