Trader slaps a collar on Theravance


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Theravance exploded higher last week, and one trader is collaring the name.

optionMONSTER's Depth Charge monitoring program detected the purchase of 2,000 January 20 puts for $1.35 and the sale of an equal number of January 30 calls for $0.50, resulting in a cost of $0.85.

Known as a collar , the strategy is commonly used by investors who own a stock and want to protect against a potential drop. In the case of today's transaction, the trader has essentially agreed to accept a maximum selling price of $30 on the shares while locking in protection at $20.

Given the premium expended, that translates into $29.50 on the upside and $19.50 on the downside. (See our Education section)

THRX is trading 2.26 percent higher to $23.96 this afternoon, up from about $20 last Monday. The drug developer has spent most of the last year fluctuating sharply between about $16 and $28.

The collar trade pushed total options in the name to 15 times greater than average so far today, according to the Depth Charge.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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This article appears in: Investing , Options

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