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Neurocrine rally met with call sellers

By: optionMONSTER
Posted: 6/17/2010 8:05:00 AM
Referenced Stocks: NBIX

Neurocrine Biosciences ripped to a 22-month high yesterday, leading traders to take profits.

NBIX Chart optionMONSTER's tracking systems detected heavy selling of the June 5 calls for $0.50 and the July 7.50 calls for $0.15. Volume in the June contracts at 1,157 was twice open interest, and 13 times open interest in the July options at 1,451.

NBIX surged 14.21 percent to $5.37 after agreeing to develop its Elagolix drug with Abbott Laboratories. Regulatory approval for the medicine, used to treat the uterine disorder endometriosis, could be sought in 2013.

The announcement followed positive test results on the drug on May 26. Together, the headlines have driven NBIX 97 percent higher in the last month.

The small-cap drug developer has returned to the same level where it traded in September 2008. Given the gains, some investors apparently think it needs to consolidate, so wrote calls to exit the stock or to earn income while they hold the shares. (See our Education section)

Overall options volume in NBIX was 10 times greater than average yesterday.

(Chart courtesy of tradeMONSTER)