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InterMune (ITMN) investor calls for upside
8/16/2010 10:58:00 AM
By: Karla Yeh
A hefty number of InterMune Inc. (NASDAQ: ITMN ) January 2011 calls crossed the tape this morning thanks to an investor who appears to have expressed bullishness on the biotechnology company. ITMN shares are outperforming the broad market strength during morning trading without any company-specific news on the wires.
At 10:16 a.m. EDT, roughly 4,000 January 2011 12.5 calls crossed the tape for $3.10 per contract. This price was right at the ask when the volume hit the tape. These longer-dated calls are home to current open interest of 1,600 contracts, indicating the investor most likely opened long call positions on a bet that ITMN shares will be trading at least 51% higher than their current level.
If the stock is trading higher than the breakeven level of $15.60, the call buyer could theoretically make unlimited profits to the upside. Once ITMN shares climb higher than the strike price, the investor takes back some of the premium paid. If the stock is still trading below the strike at expiration, these buyers will lose a maximum of $3.10 per contract, or a total of $1.24 million.
A closer look at time and sales shows the investor tied a short stock position to this bullish options trade. This action could mean the investor was more interested in trading volatility than direction. Around the same time of the options trade, more than 200,000 shares of stock crossed the tape for $10.28 per share. It looks like the investor is betting that volatility will expand during the next few months and was willing to commit a hefty amount of capital to make that bet.
ITMN shares gained more than 3%, or 36 cents, to $10.47 during morning trading. ITMN shares have been hovering around $10 throughout the last few months after selling off significantly from the $45 level in May. The company did not announce any news to account for the pop-up in the stock so far on the day.