Alkermes seems to be rolling over, and one trader is positioning
for more downside.
optionMONSTER's Depth Charge tracking system detected the purchase
of 1,000 August 12.50 puts for $1.92 on Friday. At the same time,
1,000 August 10 puts were sold for $0.60 and 2,000 August 12.50
calls were written for $0.85. The transaction resulted in a net
credit of $0.38 per put contract bought.
ALKS fell 8.01 percent to $11.60 on Friday and is down 15 percent
in the last month. The drug-delivery stock gapped lower on a
wider-than-expected loss and weak revenue number after making less
money producing the Risperdal Consta schizophrenia treatment for
Johnson & Johnson.
The stock had been rallying on optimism about Bydureon, a
breakthrough diabetes treatment under review by the Food and Drug
Administration. ALKS gapped higher on March 15 after the FDA said
it wouldn't require further tests, but the stock was then unable to
sustain its upward momentum through $14.
Friday's option trade, a combination of a bearish put spread and a
bearish synthetic short, will deliver highly leveraged returns from
ALKS pushing lower. The investor will keep the $0.38 as long as the
stock remains below $12.50 and earn as much as $2.50 more if it
closes at or below $10 on expiration.
The strategy also creates the risk of unlimited losses if the stock
rallies above $12.50, so it may have been implemented by a
shareholder looking to hedge a long position in the equity.
The transaction pushed total options volume in the name to almost 5
times the daily average in Friday's session.
(Chart courtesy of tradeMONSTER)