AstraZeneca gets vote of confidence

By David Russell,

Shutterstock photo

AstraZeneca ripped higher yesterday after winning a court decision, and today investors are betting that it will hold those gains.

AZN Chart optionMONSTER's tracking systems detected the sale of about 19,000 August 40 puts on the British drug maker against open interest of just 605 contracts. Most of the large blocks priced for $0.40, though premiums overall declined from $0.50 to $0.35 as the session progressed--evidence of a selling pattern.

AZN fell 2.20 percent to $47.67 in early afternoon trading. The shares rallied 9 percent yesterday after a judge upheld the validity of the firm's Crestor cholesterol drug against a challenge by companies including Novartis and Teva Pharmaceutical Industries.

Selling puts lets investors earn income in return for betting that that AZN will remain above $40 through expiration. He or she may consider it a low risk-strategy because the stock has traded well above that level since June 2009.

The company raised its guidance the last time it reported earnings on April 29, but investors are worried about it losing products as patent expire in coming years. The next release is scheduled for July 29.

Today's put selling pushed total options volume in AZN to nine times greater than average.

(Chart courtesy of tradeMONSTER)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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This article appears in: Investing Options
Referenced Stocks: AZN , NVS , TEVA

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