NPS Pharmaceuticals has been on a one-way trip higher, and one
investor wants to stay on the train.
optionMONSTER's Heat Seeker tracking system detected the purchase
of about 2,000 October 9 calls for $1.50 and the sale of an equal
number of October 12 calls for $0.25. Volume was below previous
positioning in the 9s, so there are two possible explanations for
One is that both legs of the trade were opened, in which case the
strategy was a
bullish call spread
. That would have cost $1.25 and will leverage a move between $9
and $12, with a maximum profit of 140 percent at the top of that
range by expiration.
The other, more likely explanation is that the investor owns the
stock and had already sold the 9s as part of a
strategy. He or she then bought them back and rolled the position
to the higher strike. That also would have cost $1.25, and in
return they have the right to earn an additional $3 on their
holding in the shares.
NPSP is up 2.15 percent to $9.52 this afternoon, trading at its
highes level since August 2011. The shares have climbed 25 percent
in the last month as investors target small drug developers as
potential takeover candidates and the market anticipates approval
of the company's intestinal medicines.
Overall option volume is 13 times greater than average so far
today, with calls outnumbering puts by more than 5 to 1.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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