One trader apparently thinks that Dendreon is a dead-money
optionMONSTER's Depth Charge monitoring program detected the
purchase of 7,500 May 4 puts for $0.21 and the sale of a matching
number of May 5 calls for $0.22. Volume was more than twice the
previous open interest at each strike, indicating new activity.
The resulting position is highly bearish, equivalent to shorting
the once-mighty biotech stock. The trade cost nothing to open and
will make money from the shares pushing lower, while a rally would
cause the investor to lose money from the short calls. He or she
may be using the strategy to
protect an existing long position
or to speculate on the bottom falling out. (See our
DNDN closed at $4.56 yesterday, down 0.76 percent. It had peaked
over $50 in 2010 amid optimism about its Provenge cancer drug, but
it's been dogged by weak sales in recent years and is down more
than 50 percent in the last 12 months.
The company doesn't appear to have announced the date of its next
earnings report, but last year's calendar suggests that it will
occur in early May. If the results are bad and DNDN falls,
yesterday's trade would profit.
Total option volume was more than 5 times its daily average for the
session, 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 The NASDAQ OMX Group, Inc.
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