Impax Laboratories is sitting at support, and one trader thinks
it's ready to surge.
optionMONSTER's Heat Seeker tracking program detected the purchase
of 2,500 June 22.50 calls for $0.83 and the sale of an equal number
of June 17.50 puts for $0.63. Volume was more than twice open
interest at both strikes.
The trade cost $0.20 to implement and gives the investor cheap
exposure to a rally in the drug developer. The
will appreciate and the
puts sold short
will lose value if the stock pushes higher, while the opposite will
happen to the downside.
While it's similar to owning shares, the strategy differs because
it will track IPXL less closely as
and expire worthless if the stock remains between the strike
prices. It also programs a buy order below $17.50, giving the
investor more than one way to get long. (See our
IPXL declined 1.38 percent to $19.35 yesterday. It gapped lower in
October following a weak earnings report and again last month after
the regulators rejected the reformulation of a drug to treat
Parkinson's disease. The shares have nonetheless stayed above the
$19.50 level where they bounced in mid-2012, which could be leading
some traders to believe that a bottom is in.
The bullish trade pushed overall option volume to 45 times greater
than average in yesterday's 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.
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