United Therapeutics dead in water?


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One trader apparently thinks that United Therapeutics is going nowhere in a hurry.

optionMONSTER's tracking systems detected the purchase of 2,000 November 47.50 calls for $3.85 and the sale of an equal number of August 47.50 calls for $2.60. Volume was more than 6 times open interest in both strikes.

Known as a calendar spread , the strategy is designed to exploit the different rates of time decay at the two expiration months. The August contracts will lose their worth more quickly than the Novembers, expanding the value of the spread from the initial $1.25 paid to open it.

Investors can also stay in the trade in hope that the stock rallies above $47.50 following August expiration. If it rallies before then, they will lose the $1.25.

The calendar spread pushed total option volume in UTHR to almost 8 times greater than average in yesterday's session. (See our Education section)

UTHR rose 0.09 percent to $43.73 yesterday and has shed one-third of its value in the last year.

The drug maker reported strong earnings in the second half of 2011 but missed estimates on the top and bottom lines the last time results came out on Feb. 14. Already stuck at their 200-day moving average, the shares gapped downward on the news and have been trending lower since.

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

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

This article appears in: Investing , Options

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