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.
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
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 The NASDAQ OMX Group, Inc.
Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.