Options Trading News

October 5, 2012  Fri 3:16 AM CT

Shire has been trading in an increasingly narrow range in recent weeks, but one call buyer is looking for the Irish pharmaceutical company to break higher in the next six months.

optionMONSTER's Heat Seeker tracking system detected the purchase of 1,320 April 95 calls for $5.20 yesterday. That volume was nearly 3 times the open interest of 454 contracts in the strike at the beginning of the day, indicating that this is fresh buying.

SHPG rose 0.83 percent to close at $88.63 yesterday. The stock spiked above $95 in early September but gapped below $89 two weeks later, and it has been trading sideways since then.

Yesterday's long calls are betting that SHPG will be above the $95 strike price in six months. The premiums in those options could rise before then in the event of a rally, allowing the trader to sell them early with a profit. If the stock doesn't gain, however, those calls could expire worthless in mid-April 2013. (See our Education section)

Total option volume in the name was 3.5 times its daily average. Only 143 puts traded in the session, a reflection of the day's bullish bias.
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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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