Why trader is selling calls in Actavis


Shutterstock photo

After a long rally, one trader apparently thinks that Actavis is running out of gas.

optionMONSTER's tracking programs detected the purchase of 5,000 March 90 calls for $0.15 and the sale of an equal number of May 90 calls for $1.15. Volume was below open interest in the March contracts but not in the May options, which means that an existing short position was closed and rolled forward in time.

The investor probably owns shares in the drug maker, formerly known as Watson Pharmaceuticals, and has been selling calls against those holdings . He or she collected an additional $1 of income from yesterday's trade while committing to remain in the trade for an additional two months. (See our Education section)

ACT fell 0.84 percent to $85.16 yesterday. The stock is up more than 40 percent in the last year but has been edging lower since late December. It peaked around $90 at that time, which could be leading some chart watchers to think that level has become resistance.

More than 10,000 contracts traded in the session, 15 times greater than average amounts, according to optionMONSTER data.

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

More from optionMONSTER




Follow on:

Find a Credit Card

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