Why one trader is selling Keryx puts
Mike Yamamoto | firstname.lastname@example.org
optionMONSTER's tracking systems detected the sale of 5,000 September 4.50 puts in one block for $0.37 yesterday. This is clearly a new position, as open interest in the strike was a mere 62 contracts before the session began.
The put seller will keep the $0.37 credit as profit if KERX stays above $4.50 through expiration in mid-September, around a level where shares traded nearly a year ago. But if the stock falls below that strike price, the trader will face the obligation to buy shares in the drug maker. (See our Education section)
KERX rose 4.34 percent yesterday to close at $7.41, continuing to climb since takeover rumors arose on March 1. The stock skyrocketed from about $3.50 to $9 at the end of January with positive results from Phase III trials for its Zerenex drug, a proposed treatment of abnormally high phosphate levels related to kidney disease.
Overall option volume in the name was about 19,300 contracts yesterday, nearly triple its daily average for the last month.