Is Transcept ready to take a break?


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Transcept Pharmaceuticals is at a long-term resistance level, and one investor is looking for a pause.

optionMONSTER's tracking systems detected the sale of 5,000 October 12.50 calls for $1.35 against open interest of 2,738 contracts. The trader is now obligated to sell shares for $12.50 if they're above that level on expiration, but including the credit their exit price would be $13.85.

TSPT fell 3.41 percent to $11.04 yesterday. It appears to be stalling around the same $11-$12 area where it peaked in 2010 and 2011. That could make some chart watchers think that it will pause before advancing further.

They may want to wait for sales results of the company's new Intermezzo drug, which was launched earlier in the month. TSPT currently has almost no revenue.

Implied volatility is also elevated in the name, at 73 percent versus the stock's 48 percent historical propensity to move. Selling calls is a common way to profit from high volatility because it suggests premiums are inflated. See our Education Section for more.

Total option volume in TSPT was nearly 5 times the daily average.

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

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This article appears in: Investing , Options

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