Somaxon Pharmaceuticals exploded higher after announcing a
collaboration with Procter & Gamble, but option traders took
the other side of the move.
The heavily shorted microcap surged higher by as much as 63
percent after announcing that the consumer-products giant would
help distribute the insomnia drug Silenor starting next month. The
product is estimated to have annual sales potential of $232 million
by 2014, according to Reuters.
SOMX, whose market cap is only $152 million, ended the session up
29 percent at $4.34. Short interest represented 20 percent of the
float in mid-July, so forced buying probably contributed to the
Call selling accounted for the bulk of the options activity,
with the February 7.50 contracts changing hands 12,226 times. Most
of the large blocks priced for $0.50 to $0.55 and occurred after
the stock pushed over $5, a level it hadn't breeched since late
June. Activity in the strike was 62 times greater than open
The September 45 calls were also heavily sold for $0.35 to
$0.45. Volume climbed to 5,535 contracts versus open interest of
Yesterday's rally drove SOMX back to the level where it traded
in March, immediately before regulatory approval of Silenor sent
the shares rocketing toward $10.
Overall options volume in the name was 177 times greater than
average in the session.
(Chart courtesy of tradeMONSTER)
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