Large trade positions for drop in Alexza

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Alexza Pharmaceuticals has been weak for years, and the bears apparently believe that it might take another hit.

optionMONSTER's Depth Charge monitoring program detected the purchase of 14,850 April 4.50 puts for an average premium of $0.64. A matching number of April 3.50 puts was sold for $0.13, resulting in a net cost of $0.51.

Known as a bearish put spread , the position will expand to $1 in value if ALXA closes at $3.50 on expiration. That would be a profit of 96 percent based on the opening cost. Alternatively, the trader may be rolling an existing trade from the 3.50s to the 4.50s, increasing leverage to the downside in the share price.

Regardless, the activity reflects a belief that the stock is vulnerable to a drop in the next three weeks. (See our Education section)

ALXA is down 1.142 percent to $4.35 in afternoon trading. It was valued above $30 in 2010 but then gapped lower after the Food and Drug Administration rejected its schizophrenia drug. The company later obtained approval for a narrower set of uses.

Total option volume is 10 times greater than average in the name so far today, according to the Depth Charge. Puts outnumber calls by a bearish 169-to-1 ratio.

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


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