Credit: Shutterstock photoForest Laboratories is hovering at the top of its recent range, and one investor is looking for a rally to ensue.
optionMONSTER's Heat Seeker monitoring program detected the purchase of 3,000 February 38 calls for an average premium of $1.425, and the sale of an equal number of February 32 puts for $1.50. There was no open interest in either strike when the session began.
The trader collected a credit of $0.075 and stands to benefit from a gradual appreciation in the pharmaceutical stock over the next eight months. If it climbs, he or she will make money on the calls and the puts sold short will lose value. The opposite will happen to the downside.
FRX fell 0.29 percent to $34.55 in morning trading. It bottomed around $28.50 late last year, and has been pushing its way higher since. The shares are now holding support above their 50-day moving average after a period of consolidation, which some chart watchers may consider evidence they will continue higher. There was also bullish call buying in late May, FRX's last two earnings reports were better than expected.
The main difference between today's two-part strategy and owning stock is that it will trade movements in the share price less closely as time passes, and expire worthless if FRX remains between $32 and $38.
Overall option volume is quadruple the daily average so far in the session, according to Heat Seeker.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
