Elan fell hard last week, but one big investor apparently
doesn't think that it will go much lower.
optionMONSTER's monitoring programs detected the sale of about
50,000 January 11 puts against open interest of just 384 contracts.
They initially priced for $1.65, but premiums fell to $1.50 as the
trades crossed. That reflects strong selling pressure, especially
because the stock inched lower at the same time. (Puts and stock
normally move in opposite directions.)
The trader is now obligated to buy shares in the Irish drug maker
for $11 if they close below that level on expiration. Including the
credit earned, the entry price would be $9.35 to $9.50.
ELN rose 0.17 percent to $11.99 on Friday. It gapped down by 15
percent last Tuesday after reporting that its Bapineuzumab compound
failed to improve memory loss in a subset of patients genetically
predisposed to Alzheimer's disease. Tests for other groups will
when they like a company but don't want to spend money buying
shares. If their bullish sentiment is correct and the stock remains
above the key level, the contracts will expire worthless and the
traders keep the premium as profit. (See our
section for other strategies that make money from the
passage of time
Overall option volume was more than triple the daily average in the
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