Volatility play bets on move in Medicines


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One investor is looking for things to get interesting in Medicines.

optionMONSTER's tracking systems detected the purchase of 2,145 October 21 puts for $1 and 2,145 October 30 calls for $1.15. There was barely any open interest in either contract before the trade appeared.

The transaction resulted in a cost of $2.15 and will profit from increased volatility in the pharmaceutical stock. Known as a long strangle , the trade comes shortly before second-quarter earnings are released on July 25.

Option premiums often increase before big news events as the market prices in the possibility of a rally or selloff. (See our Education section for more strategies that profit from volatility rather than directional moves .)

MDCO fell 0.98 percent to $24.25 yesterday. The stock is up 26 percent in the last six months and is near its highest levels since September 2008.

Overall option volume was 26 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 Nasdaq, Inc.

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This article appears in: Investing , Options

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