Credit: Shutterstock photoQuestcor Pharmaceuticals pulled back to support yesterday, and the bulls stepped in.
optionMONSTER's Heat Seeker's monitoring program detected the purchase of 2,500 January 75 calls for $12 and the sale of an equal number of January 50 puts for $11.20. Volume was more than 6 times the previous open interest at each strikes, which indicates that new positions were implemented.
The strategy is highly leveraged to gains in the drug maker's stock, with every $80 the investor spent controlling 74 shares. Buying that much stock outright would cost more than $4,600. (See our Education section for more on long calls and short puts .)
QCOR rose 3.65 percent to $62.97 yesterday. The stock rallied sharply after being recommended on our exclusive Market Action webinar in mid-January, then dropped following a so-so earnings report last week. It's now attempting to hold support at the important $60 level, which is also its 100-day moving average.
The company has been aggressively targeted by short sellers, who last week alleged that a sample of its Achtar drug didn't contain a key ingredient.
In another big trade, 5,000 July 50 puts were sold for $6.65 and an equal number of the July 40 puts were bought for $4.30. Volume was below open interest at the higher strike, so an existing position may have been rolled lower or a new credit spread may have been initiated.
Total option volume was almost 5 times greater than average in yesterday's session.
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.
