Infinity Pharmaceuticals has been bottoming after a massive
pullback, and the bulls are piling in.
optionMONSTER's Heat Seeker monitoring system detected a slew of
upside activity in the drug developer today, with investors
implementing several strategies. The first thing they did was buy
the October 16
calls for $3.40. More than 1,200 of those traded against previous
interest of just 3 contracts, clearly showing that these are
The next trade appeared in the August 17 puts, with an even 5,000
sold for $0.71. Seconds later, another 3,000 hit in the October 15
puts for $0.95, also sold. Volume was more than twice open interest
at both strikes.
locks in the price where shares can be purchased, giving them
potential leverage to the upside.
lets investors collect income in return for agreeing to buy stock
in the event of a pullback. It's a neutral-to-bullish strategy,
reflecting a belief that downside is limited and showing a
willingness to own the stock at lower prices. (See our
INFI is up 9.24 percent to $19.63 in afternoon trading. It rallied
from $6 to $50 between February 2012 and March 2013 but then pulled
all the way back below $16 by early this month. The stock has been
holding its ground since, and now the bulls are looking for a
bounce as the 10-day moving average turns higher.
The company has ridden a wave of enthusiasm toward its pipeline of
potential cancer drugs, and much of the recent selloff was
met with put selling
as investors wagered that it was near a bottom.
Another trader combined
to craft a highly leveraged position similar to owning shares. He
or she sold 1,400 of the August 16 puts for $0.30 and bought an
equal number of August 20 calls for $0.75. The trade cost $0.45 and
will double the investor's money for every $0.45 that INFI trades
above $20.45 by expiration.
Total option volume is 6.5 times greater than average in the name
so far today.
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