Avanir has pulled back after rallying, and one investor wants
to get long.
Instead of buying shares, however, the trader is writing puts.
optionMONSTER's tracking systems detected a transaction in the
June 3 contracts, with a block of 5,000 trading for $0.45. That
was the asking price at the time, which indicates that they were
AVNR is down 2.73 percent to $2.85 in morning trading but is up
more than 40 percent in the last two months. The company's
revenue is expected to double next year as sales increase for its
Neudexta neurological drug.
The strike price of the puts is below the current price of the
shares, meaning that options are
at the money
. If AVNR rallies above $3, the trader will keep the premium and
the contracts will expire worthless. Otherwise, he or she will
have to buy stock for $3 but, including the income from the put
sale, the effective entry price would be $2.55.
allows them to
manage an entry price
into the stock and eliminates the need to time a purchase. It
also lets traders make some money if AVNR runs away from them.
by Chris McKhann)
The trade pushed overall volume in the stock to 6 times greater
than average so far today.