One biotech investor wants to take the money and run.
optionMONSTER's Heat Seeker monitoring program detected heavy
call volume in the iShares Nasdaq Biotechnology exchange-traded
fund, which focuses on industry heavyweights such as Biogen,
Gilead Sciences, and Amgen.
Some 10,000 April 245 calls traded for $1.60, along with 5,000 of
the April 230s for $7.20. Volume was more than 9 times open
interest at both strikes, indicating that new positions were
The transaction was probably a ratio spread, with the 230s bought
and the 245s sold for a net cost of $4. The investor will collect
$15 a share, or $7.5 million, if IBB closes at $245 at expiration
and leave the investor short above that level.
He or she probably owns the fund and is using the strategy to
manage an exit now that it's dropping. This way they can leverage
a small rebound and lower their breakeven. See our Education
section for more managing entries and exits with options.
IBB fell 2.86 percent to $229.38 on Friday. It's down 13 percent
in the last month while the S&P 500 is little changed. That
marks a big change from the last two years, when it outperformed
the broader market by a wide margin. Emerging markets, the former
laggards, have been rallying at the same time, indicating that a
big sentiment shift is underway.
Overall option volume in IBB was quadruple the daily average,
with calls accounting for 82 percent of the total.
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