One investor apparently believes that the upside is limited in
United Therapeutics after a selloff last month.
optionMONSTER's trade monitors detected the sale of 1,000 December
47.50 calls for $2.96 and the purchase of an equal number of
December 55 calls for $0.69. Volume was more than 7 times open
interest at both strikes.
The investor collected a credit of $2.27, which will be kept as
profit if the drug stock closes at or below $47.50 on expiration.
Gains will erode above that level, turning to losses over $49.77,
and the maxium loss of $5.23 will occur at $55 or higher.
Known as a
call credit spread
, the trade is an example of a
strategy that makes money from a sideways move rather than a rally
or drop. In the case of today's position, the trader is hoping for
a modest decline, but most of the money will be made from
melting out of the 47.50 contracts. (See our
UTHR is up 0.33 percent to $48.33 in early afternoon trading. The
biotechnology company was above $50 last month but cratered on Oct.
24 after announcing that the Food and Drug Administration had
rejected an extended-release version of its treprostinil
The shares have tried to bounce more recently, but today's credit
spread is betting against further gains. Overall option volume is
more than twice the daily average in the name, according to our
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