How spread bets on InterMune pop

By David Russell,

Shutterstock photo

InterMune has been fighting its way higher after a massive selloff, and one trader is looking for a steady rally into the New Year.

ITMN optionMONSTER's Heat Seeker monitoring system detected the purchase of 8,350 January 10 calls for $4.50 and the sale of an equal number of January 22.50 calls for $1.30. The trade cost a net $3.20 to implement and pushed total options volume in the drug developer to 7 times greater than average.

ITMN is down 0.09 percent to $12.10 in afternoon trading. The shares plunged from over $40 to about $10 on May 5 after the Food and Drug Administration refused to approve its pirfenidone lung drug and ordered new trials. Since then the company cut its earnings guidance and slashed its workforce by 40 percent.

Today's option trade, a bullish call spread, reflects an expectation the stock will attempt to fill some of the huge bearish gap from the spring. It will earn a maximum profit of 290 percent if ITMN climbs to $22.50 by expiration.

ITMN was scheduled to appear at an investor conferences hosted by Morgan Stanley and Robert W. Baird on Monday and Tuesday. It will also participate in the 5th Annual JMP Securities Healthcare Conference at 3 p.m. ET on Sept. 28.

Calls outnumber puts by 37 to 1 in the stock so far today, reflecting the bullish sentiment.

(Chart courtesy of tradeMONSTER)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing Options
Referenced Stocks: ITMN

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