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Why trader is selling puts in Optimer

Posted
4/4/2012 11:18:00 AM
By: optionMONSTER
Referenced Stocks:OPTR

Optimer Pharmaceuticals has been grinding higher, and one investor sees little risk of a selloff.

optionMONSTER's tracking systems detected the sale of 5,000 May 15 puts for $1.20 against no previous open interest. It accounted for all the options volume in the drug developer so far today.

The investor is now obligated to buy OPTR shares for $15 if they're below that level on expiration. The stock is now down 1.8 percent to $14.20, so those puts are in the money . Including the credit earned, however, the trader's entry price would be $13.80.

Another interesting thing about the short-put strategy is that it will perform similarly to owning calls because the puts have a strong inverse correlation to the shares. It stands to benefit from both time decay and from potential upside in the stock. (See our Education section)

OPTR has been growing quickly after regulators approved its Dificid bacteria drug last year. Chart watchers may also like the stock because its moving averages have been lining up for a potential rally, and it now seems to be finding support above the $14 level where it peaked in February.

The put sale pushed total option volume in the name to 15 times the average amount so far today.