Bearish play in Alexza Pharmaceuticals

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Shares of Alexza Pharmaceuticals have been declining for the last month, and traders are positioning for the possibility of another leg down.

More than 4,000 March 4 puts were bought on Friday afternoon, led by a block of 2,491 that went for $0.42, according to optionMONSTER's Depth Charge system. The volume was nearly 15 times the strike's open interest of just 272 contracts before the day's trading began, indicating that these are new positions.

ALXA rose 1.12 percent on Friday to close at $4.53. The company gapped down from the $6 level on Dec. 24 despite approval from the Food and Drug Administration for Adasuve, its treatment for schizophrenia and bipolar disorder.

Then on Jan. 4 Piper Jaffray cited "uncertainty of limitations" on the drug's use while initiated coverage of ALXA with a "neutral" rating and a $5 price target. The stock has been drifting lower with its 200-day moving average ever since.

The puts bought Friday, which lock in the price where traders can sell shares no matter how far they might fall, were not tied to any stock trades identified by our systems in the session. The options could have been purchased to protect a long position established earlier, or they could be making a straight bearish bet that ALXA will fall more than 20 percent by expiration in mid-March.

Total option volume in ALXA reached 6,221 contracts on Friday, 6 times more than its daily average of 1,011. Puts outnumbered calls by 11 to 1, a reflection of the session's bearish sentiment.

It was the second time this month that Alexza has seen unusual option activity. On. Jan. 8 a bullish trader rolled a January long-call position up to the February 5.50 strike.

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