Novartis has been rising sharply for almost two months, and but
now one trader is positioning for a reversal.
optionMONSTER's Depth Charge tracking system detected the purchase
of 10,000 January 55 puts for $1.05 and the sale of an equal number
of January 65 calls at an average premium of $0.625. Volume was
more than three times open interest in both strikes.
The trade cost about $0.425 to implement and will simulate a short
position in the Swiss drug stock. It may be the work of a
shareholder looking to protect a long position in the stock against
a pullback. If that's the case, the strategy would be known as a
collar, capping the upside at $65 and covering losses below
Alternatively, it might be an outright bearish play, in which case
it would make money below $54.575 and experience losses above $55.
(See our Education section)
NVS is up 0.7 percent to $59.63 in afternoon trading and has risen
19 percent since mid-August. The shares are down after opening at a
new two-year high today and are near their all-time high around
$61, so some traders may think that it's time to exercise
caution--especially with the next earnings report scheduled for
Overall option volume in NVS is 5 times greater than average so far
(Chart courtesy of tradeMONSTER)
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