Bearish trade targets Amarin after rally

optionMONSTER

Amarin has been ripping higher, but now the bears are ready to pounce.

optionMONSTER's Depth Charge monitoring program detected the purchase of 5,000 September 14 puts for $2.30. Equal-sized blocks were sold in the September 10 puts for $0.70 and the September 22 calls for $0.70. Volume was more than triple open interest at all three strikes.

The trade cost about $0.90 and will earn a maximum profit of 344 percent if the drug developer closes at or below $10 on expiration. It also renders the investor short AMRN shares if they go above $22--a level the stock has never seen.

The investor is probably using the options to hedge a long position in the equity. The trader now has downside protection to $10 and has locked in an exit at a level where he or she would probably be happy to sell. (See our Education section for more on the strategy, which combines a bearish put spread with a collar trade .)

AMRN is off 0.33 percent to $15.10 this morning but has doubled since March. The stock has been climbing along with others in the sector as investors seek names with less exposure to the global economy and as large pharmaceutical companies look to buy smaller firms with promising new drugs.

Overall option volume in AMRN is 3 times greater than average so far today, according to the Depth Charge.

More From optionMONSTER

Rates

View Comments (0)