Trader looks for Impax Labs to leap

By
A A A

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 long calls 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 time passes 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 Education section)

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.

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


This article appears in: Investing , Options

Referenced Stocks:

optionMONSTER

optionMONSTER

More from optionMONSTER:

Related Videos

ColonialMills_USETBASITE
ColonialMills_USETBASITE            

Stocks

Referenced

Most Active by Volume

81,768,754
  • $74.11 ▼ 2.31%
77,395,717
  • $9.42 ▼ 5.80%
67,947,205
  • $17.02 ▲ 0.18%
53,864,169
  • $32.58 ▼ 3.95%
44,748,631
  • $11.32 ▲ 0.98%
42,926,278
  • $9.97 ▼ 9.03%
42,401,116
  • $41.80 ▼ 0.67%
39,870,972
  • $106.98 ▼ 0.34%
As of 10/30/2014, 04:15 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com