Dendreon Corp. (NASDAQ: DNDN )
did not announce any news today to account for the decline in
shares on the day, and at least one option investor boosted put
volume but limited risk during afternoon trading to bet on downside
during the next month.
At 12:42 p.m. EST, a few blocks totaling roughly
4,600 July 34-38 put spreads changed hands thanks to at
least one investor who appears to have paid $1.30 per
. The out-of-the-money (
) July 34 puts were home to current open interest of 390 contracts
while the near-the-money July 38 puts were home to current open
interest of 823 contracts, indicating the majority of this action
was initiated to open. The lower-strike puts changed hands for 66
cents per contract, which was the bid price at the time of the
trade, while the higher-strike puts crossed the tape for $1.96, or
one cent higher than the ask price, when the volume crossed. This
pricing action suggests the investor was willing to risk $1.30 per
spread on a bet that DNDN shares will be trading lower than $36.70
at July options expiration in 29 days. If DNDN shares are trading
at $34 or lower, the investor could make a maximum profit of $2.70
per spread (the difference between the strikes minus the premium
paid). On the other hand, if the stock stays above the breakeven
price, this bear put spread caps maximum loss at the premium paid,
or $1.30 per contract.
It is possible that this investor tied the options action to a
long stock position, but this article highlights just the put
volume on the tape that calls for at least 11% of downside during
the near term.
Shares of DNDN dropped by $1.09, or more than 2%, to $38.48
during afternoon trading. Analysts expect the company's earnings
report around Aug. 10.