One investor is looking for Dynavax Technologies to come back
from a brutal selloff last year.
optionMONSTER's Heat Seeker monitoring program detected the
purchase of 2,000 July 4 calls for $0.75 and the sale of an equal
number of March 6 calls for $0.12. Volume was below open interest
in the 6s, so there are two possible explanations of the activity.
One is that an existing position was rolled down in price and
further out in time. That gives the investor a greater chance to
profit, but for an additional cost of $0.63.
The more likely possibility is that both trades were opened as part
of a bullish diagonal spread. In that case, the investor has locked
in a purchase price of $4 through the summer while agreeing to sell
the stock for $6 if it goes above that level during the next month.
In this case, should DVAX remain below $6 through March expiration,
the trader can sell more calls at the higher strike to further
reduce the cost basis. (See our
section for more on how options can be used to manage trades.)
DVAX is down 0.25 percent to $3.21 in morning trading. It lost
almost half its value on Nov. 16 after a Food and Drug
Administration advisory panel voted against approval of its
Heplisav hepatitis B vaccine. Since that drop, however, the shares
have been trying to rebound.
Total option volume is twice the daily average so far in the
session, with calls outnumbering puts by 51 to 1.
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.