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• IPF 0% Rate It
• ITMN 67% Rate It

A call spread purchase in biotechnology company InterMune Inc. (NASDAQ: ITMN ) suggests at least one investor took a moderately bullish stance on the name and is betting on upside.

ITMN shares closed down 46 cents on Monday, or roughly 1%, to $44.94 without any company-specific news. ITMN is due to announce earnings on April 29 after the market closes, and analysts estimate an earnings loss of 58 cents a share. But the big event that the market seems to have priced into the stock is May 4, when the FDA is expected to give final ruling on Intermune's pirfenidone, a drug that treats patients with idiopathic pulmonary fibrosis ( IPF ).

Options volume heated up in January 2011 thanks to an investor who bought 7,000 January 2011 55-75 call spreads for $5.75 per spread. This means the investor paid a total of $4,025,000 for this spread, and could make a maximum profit of $14.25 per spread if ITMN shares climb higher than $75 prior to January 2011 options expiration. Investors begin to make money on this spread if ITMN shares climb higher than the breakeven price of $60.75. If the stock finishes below the breakeven, investors begin to lose money and could incur a maximum loss of the premium paid, or $5.75 per spread, if the stock stays below $55.

Implied volatility of the January 55 calls is 76% and the January 75 calls have an implied volatility of 69% compared to the stock's 30-day historical volatility of 35%. ITMN implied volatility is trending dramatically higher than recent realized volatility because of the FDA event looming on the horizon. This is quite commonplace in shares of biotechnology stocks, as one event can cause large volatility in the shares. It is noteworthy, however, that ITMN had a dramatic up move starting in early March when it was announced that the FDA advisory panel was going to recommend approval of the drug.

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