Bulls take a heavy dose of Medicines

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One investor wants to give Medicines Company more time to rally.

optionMONSTER's Heat Seeker monitoring system detected the purchase of 2,000 January 20 calls for $1.30 and the sale of an equal number of December 20 calls for $0.45. Volume was below open interest in December but not January, which suggests that an existing long position was rolled forward by one month.

The trade cost $0.85 and will give the investor more time to profit from upside in the drug maker. It also protects them from the accelerating time decay that will erode the value of the December contracts as expiration approaches. (See our Education section)

Another bullish trade occurred less than 15 minutes later when 1,500 January 20 calls were bought for $1.20 and an equal number of January 17 puts were sold for $0.60. That trade cost $0.60, and is similar to owning shares in MDCO, which is up more than 30 percent in the last three months.

Most of those gains followed an Oct. 3 legal settlement with Teva Pharmaceutical regarding the production of a generic version of MDCO's Angiomax. Its last earnings report on Oct. 26 was mixed, with revenue better than expected but profit missing. (See researchLAB for more)

The stock closed at $18.77 yesterday, down 0.71 percent in the session. The two bullish trades pushed overall option volume in the name to more than 80 times greater than average, according to the Heat Seeker.



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.


This article appears in: Investing , Options

Referenced Stocks: MDCO

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