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Human Genome Sciences (HGSI) trade bets on limited upside

Shares of Human Genome Sciences Inc. (NASDAQ: HGSI ) are showing strength even after the company's earnings announcement is out of the way, and at least one investor seems convinced the upside will not continue during the near term. The September 27 calls were active during morning trading, and the sentiment seems moderately bearish.

At 11:03 a.m. EDT, 5,000 September 27 calls changed hands for $2 per contract. Current open interest of the near-the-money calls is just 116 contracts. This options action suggests an investor sold to open these calls and will make money if HGSI shares are trading lower than $29 at September options expiration.

If the stock is trading above $29 at expiration and continues to the upside, this short call position could incur unlimited losses. The maximum gain on this trade is the premium collected in the event that HGSI shares are still trading below the strike price at expiration. The limited return factor differentiates a moderately bearish short call position from a bearish short stock position. You can build a profit/loss graph of this trade and other stock and option strategies by opening a free

DOLE shares are relatively unchanged at $10.60 so far on the day. The stock reached a 52-week high of roughly $12.50 in March, and options action on the tape suggests at least one investor expects the stock to head closer to the recent highs prior to January 2011 options expiration.

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HGSI gained 45 cents, or nearly 2%, to $26.27 as of 11.43 a.m. EDT. The stock reached a six-month closing high of $33.26, and is currently trading roughly 20% lower than this level. On July 22, HGSI announced an earnings loss of 30 cents per share and missed estimates by three cents.

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


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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