Why Questcor trade is turning cautious
David Russell | [email protected]
optionMONSTER's Depth Charge tracking system detected the purchase of about 6,000 October 50 puts, most of which priced for $2.72. Roughly the same number of October 40 puts were sold at the same time for $0.37. Volume was more than 4 times the open interest in each strike at the start of the day, indicating that this is a new position.
Known as a bearish put spread, the trade cost $2.35 and will earn a maximum profit of 326 percent if the Anaheim, California-based drug maker closes at or below $40 on expiration.
QCOR is up 3.53 percent to $51.88 this afternoon and more than 40 percent since the beginning of August. The shares had pulled back sharply in July, but earnings have been good and a recent decision by Medicaid cutting the mandatory rebate on its Achthar drug drew buyers back to the name.
Today's bearish trade is probably the work of an investor looking to hedge a long position. It's the complete opposite of what we saw yesterday, when investors bought the October 55 calls and sold the October 60 calls. That trade will earn more than 400 percent if QCOR goes to $60 or higher. (See our Education section)
Overall option volume in the name is 6 times greater than average so far today, according to the Depth Charge. Puts account for more than 80 percent of the total.