Questcor problems keep traders on edge

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Questcor Pharmaceuticals has been struggling all year, and one investor is still worried.

optionMONSTER's Depth Charge tracking system detected the purchase of about 5,000 April 35 puts for $2.34. An equal number of March 35 puts were sold at the same time for $0.84, but volume was below open interest.

This suggests that an existing position was closed in the March contracts and rolled forward to April. The trade gives the investor an extra month of downside protection on the high-flying drug maker at an incremental cost of $1.50.

He or she is probably using the puts to hedge a long position in the equity. By adjusting it now, the trader avoided the quickening pace of time decay that will occur into expiration at the end of next week. (See our Education section)

QCOR is trading at $36.10, down 5.22 percent this afternoon and 14 percent this year. That weakness has come despite a strong earnings report on Feb. 22 and a rally of almost 200 percent in 2011.

Overall option volume is almost quadruple the daily average so far today, according to the Depth Charge. Puts have accounted for more than 80 percent of the activity.

The stock was also the target of a bullish strategy earlier in the week.




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.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: QCOR

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