Markets

How the bulls are playing Horizon

Horizon Pharma has gotten slammed, but traders think it's oversold.

optionMONSTER's Heat Seeker tracking program detected the purchase of 2,800 November 28 calls yesterday, most of which priced for $2. Volume was more than 20 times open interest at the strike.

Long calls lock in the price where investors can buy shares, allowing them to profit from a rally with limited capital at risk. They can also generate significant leverage, as our premium customers have seen many times already this year. (See our Education section)

HZNP rose 0.67 percent to $25.69 yesterday. It more than tripled in value between January and July, then retreated with the broader market in August. The drug maker gapped lower again on Monday after Breen downgraded the stock to "hold" from "buy," citing worries about the politics of drug pricing.

Nonetheless shares are sitting at their 200-day moving average and near the level where they gapped higher in March. That could make chart watchers think it will hold support.

Roughly 2,700 November 17 puts were sold later in the session for $0.45, another bet that downside will be limited.

Total option volume was 3 times greater than average in the session.

Disclosure: I own HZNP shares.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


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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