Avanir receives vote of confidence

By David Russell,

Shutterstock photo

Avanir Pharmaceuticals has been rallying since last year on optimism about its neurological drug Zenvia, and one investor is confident it will hold its ground.

AVNR Chart optionMONSTER's tracking systems detected the sale of 2,500 August 2.50 puts for $0.15 and $0.20 against open interest of just 11 contracts. The transaction pushed total options volume in the small-cap drug developer to about 10 times the daily average.

AVNR rose 2.56 percent to $3.21 in morning trading. The stock is up 31 percent in the last month and has more than quintupled since April 2009 as positive news emerged on Zenvia, a treatment for Pseudobulbar affect. The condition causes uncontrollable emotional outbursts.

The Food and Drug Administration is expected to rule on Zenvia by the end of October. AVNR also got a boost higher last week after Jefferies initiated the stock with a "buy" rating.

Selling puts allows the investor to earn income from insuring against a big decline. He or she will be able to keep the premium as long as the shares remain above $2.50 by expiration.

The trade also takes advantage of the elevated 154 percent implied volatility level in the AVNR, which is more than twice realized volatility in the name over the previous 10-, 30-, or 50-day periods. (See our Education section)

(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: AVNR

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