Impax Laboratories has bounced hard, and one investor thinks
the next move could be lower.
optionMONSTER's Depth Charge tracking program detected the
purchase of 2,547 December 20 puts for $0.70 and the sale of an
equal number of October 25 calls for $0.70. Volume was more than
7 times open interest at both strikes.
The investor is probably using the options to hedge a long
position in the Silicon Valley-based drug maker. He or she now
stands to profit from a drop in the share price but will also be
forced to sell their stock if it goes above $25 during the next
IPXL dropped 0.58 percent to $23.83 yesterday, but is up 21
percent in the last month. Most of that move came after earnings
and revenue beat expectations on July 31. The shares then stalled
around the same level where they peaked in April, which could
make some traders expect they will remain range bound for the
Thursday's option trade was a variation of a so-called collar
strategy, which typically entails contracts of the same month.
Using the different expirations provided the investor with
protection for a longer period of time, and more quickly removes
the level at which they must sell shares in the event of a rally.
Some 5,200 contracts traded in total during the session, almost
19 times the average daily volume.
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.
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