Avanir Pharmaceuticals is rebounding from a key support level,
and one investor is confident that the stock will hold its ground.
optionMONSTER's tracking systems detected the sale of 2,500 July
2.50 puts, most of which priced for $0.25. The transaction
accounted for almost all the activity in the micro-cap drug
AVNR rose 4.76 percent to $2.64 in morning trading but is down 16
percent in the last month. The stock had ripped as high as $3.45 in
early May but then declined to the $2.35 area that had presented
resistance last year. The level also corresponds to AVNR's 100-day
moving average (purple line on chart).
The company's fortunes are tied to Zenvia, a Phase III drug
candidate to treat Pseudobulbar Affect, a neurological disorder
that doesn't have any competing treatments. AVNR started rallying
in late March before it made presentations on the drug, which is
expected to be approved or rejected by the Food and Drug
Administration by Oct. 30.
Selling puts allows the investor to reap income from the stock's
rich 130 percent implied volatility. The transaction obligates him
or her to buy the shares for $2.50 if they fall below that level,
so it reflects a belief that the potential downside is limited.
Overall options volume in the stock is 15 times greater than
average so far today.
(Chart courtesy of tradeMONSTER)