InterMune spiked last week on positive news about one of its
drugs, and now volatility sellers are coming out of the
optionMONSTER's tracking systems detected the sale of more than
10,000 April 15 contracts for $0.45 to $0.55 against open interest
of 4,886 yesterday. There was also heavy selling in the January 35
calls, helping to push total option volume in the stock to 14 times
greater than average in the session.
ITMN rose 2.64 to $35.81 yesterday. It more than doubled on Friday
after a European panel recommended approving the company's Esbriet
drug for the treatment of lung disease. The decision removed
considerable uncertainty about InterMune, which lost about
three-quarters of its value in May following a rejection by U.S.
Yesterday's option action reflects a belief that the stock will now
likely remain in a range. Such trades are common after clarity
about a company's future improves, which causes implied
volatility--and thus option premiums--to drop. (See our Education
In the case of the puts, ITMN would have to lose more than half
its value by expiration for the investor to lose money. The trading
in the January 35 calls was also noteworthy because they priced for
$3.40 to $4.40, indicating that investors don't expect ITMN to
climb past about $38 or $39 in the next five weeks.
(Chart courtesy of tradeMONSTER)
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