One investor is adjusting a bullish position in Medivation,
whose shares have been consolidating after a screaming rally last
optionMONSTER's Heat Seeker monitoring program detected the
purchase of 3,750 June 55 calls for $4.25 and the sale of 2,500 May
50 calls for $5.10, resulting in a net cost of $318.750. Volume was
below open interest in the May contracts, which suggests that an
existing bullish wager was closed and rolled forward in time.
Adjusting the trade protects the investor from a near-term pullback
and lets him or her remain exposed to a rally with
later in the spring. The 50s sold are in the money and have a delta
of 0.80, which means they are more susceptible to lose value if the
drug developer falls. Swapping them out for the June 55s maintains
of the overall position, while also reducing their sensitivity to
the downside in the next few weeks. (See our
section for more on how options can be used to manage risk.)
MDVN is down 1.33 percent to $54.33 in afternoon trading. It surged
more than 500 percent between November 2011 and October 2012 after
announcing positive Phase III results for its prostate-cancer drug
under development but has been fluctuating in a range since.
It bounced sharply in the from under $43 earlier this month, and
now appears to be stalling. That could be leading some traders to
believe that it will pause or drop in the near term, helping
to explain today's activity.
Total option volume is 5 times greater than average so far today,
according to the Heat Seeker. Calls outnumbered puts by 17 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.
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