Options Trading News

February 22, 2013  Fri 9:24 AM CT

Vertex Pharmaceuticals has been trapped in a tight range recently, and traders are betting that any downside will be limited in coming months.

optionMONSTER's tracking systems detected the sale of 6,990 April 43 calls this morning, led by a print of 5,695 that went for $3.98. This is clearly new positioning, as open interest in the strike was a mere 248 contracts before today's trading began.

These short puts are betting that VRTX will stay above $43 through expiration in mid-April, a level where it was trading at the beginning of this year. If the stock falls below that strike price, the trader will face the obligation to buy shares at an effective price of $39.02 once the credit from the put sale is factored in. (See our Education section)

VRTX is up 1.03 percent to $45.28, just above its 50-day moving average. The stock fell sharply after hitting resistance at the $60 last October but has been trading in a tight range between about $45 and $47 for the last month.

Today's put selling made up the vast majority of the option volume in the name, which totals 7,459 so far. That is already well above its full-session average for the last month.
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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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