Markets

Inhibitex investor looks for more gains

Inhibitex has made a giant move, and one investor is looking for more upside in the drug developer.

optionMONSTER's tracking systems detected the purchase of 2,315 May 15 calls for $2.65 and the sale of an equal number of August 25 calls for $0.80. Volume was below open interest in May, so there are two possible explanations for the activity.

One is that the trade is a new diagonal spread, which involves buying and selling contracts in different months. The strategy is a bet that INHX will close above $15 in May and then continue higher. That would lock in an entry price on the shares and obligate the trader to sell at $25 three months later.

The second explanation is that he or she owns the stock and had previously sold the May contracts as part of a covered call . By rolling the position up, he or she would be able to collect an additional $10 of upside. (See our Education section)

Regardless, both trades cost $1.85 and reflect a belief that INHX is going above $15 in the first half of 2012.

Shares are down 2.65 percent to $10.66 today but have more than doubled in the last two months. Those gains followed positive trials of its INX-189 hepatitis C drug. (See researchLAB for more)

Overall option volume is twice the average amount in INHX do far today, with calls outnumbering puts by 44 to 1.

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.

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