Strategy is tailored for Biodel results

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Biodel has major clinical data due later this year, and one investor tailored a strategy in hopes of good news.

optionMONSTER's tracking systems detected the purchase of 4,000 September 4 calls for $0.50 and the sale of an equal number of May 3 puts for $0.50. Volume exceeded the previous open interest at each strike, indicating that new positions were initiated.

This spread is unusual because BIOD closed Friday unchanged at $2.65, leaving those puts in the money . It also turns some heads because the strategy uses different expiration months, but it makes sense considering the timing.

BIOD has enrolled patients in a Phase II study of its BIOD-123 compound for the treatment of diabetes and expects results by the end of the third quarter. Owning the September calls will provide exposure to a rally if the data is positive.

The trader paid for the contacts by selling the May 3 puts, resulting in no net cost. But because of these short puts , he or she also faces the possibility of being forced to buy shares if they remain below $3 on May expiration six weeks from now. (See our Education section)

Total option volume in Biodel was 14 times greater than average in the session.



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: BIOD

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