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)
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.