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Infinity Pharma gets vote of confidence

By: optionMONSTER
Posted: 7/27/2012 12:16:00 PM
Referenced Stocks: INFY

Infinity Pharmaceuticals has been climbing a wall of worry, but one trader apparently believes that it will keep its grip.

optionMONSTER's tracking systems detected the sale of 2,000 September 15 puts for $0.50 against no previous open interest. The trade accounted for more than two-thirds of the volume in the name so far today.

Selling puts creates an obligation to buy shares if a stock falls to a certain level, $15 in the case of today's trade. Investors use the strategy when they're bullish but don't want to spend capital getting long. (See our Education section for more ideas on how options can be used to make money from the passage of time .)

INFI has rallied 7.48 percent to $17.81 in midday trading and is up 32 percent in the last month. The stock has been ripping higher despite negative headlines in mid-June, when it halted development of a cancer drug, and in mid-July, when it announced terminating a contract with two backers.

The price action has been similar to activity in Synta Pharmaceuticals yesterday as investors continue to buy up small drug developers in hope of acquisitions by larger companies.

Overall option volume in INFI is 10 times greater than average so far today.