The bulls keep coming back to Amarin after a jarring selloff last year.
Once considered a takeover candidate, the drug maker gapped lower on Dec. 7 after announcing that it would market its Vascepa cholesterol drug without the benefit of a strategic partner. Management also borrowed at onerous rates to finance the effort.
Friday's option activity indicates that one big investor thinks AMRN is ready to recover all those losses, and then some. optionMONSTER's Heat Seeker scanner detected the purchase of 6,000 June 14 calls for $0.50 and the sale of an equal number of June 20 calls for $0.10. Volume was more than triple the previous open interest at each strike, indicating new positions.
Known as a bullish call spread , the strategy is highly leveraged to gains in the share price. It cost just $0.40 to open and will earn a profit of 1,400 percent if the stock closes at $20 or higher by expiration on June 21.
The relatively inexpensive cost of the trade is its main benefit, giving the investor exposure to a runaway rally while limiting risk in case the stock crashes. (See our Education section for more on how options can be safer than stocks.)
AMRN rose 0.59 percent to $8.58 on Friday. Calls outnumbered puts by a bullish 21-to-1 ratio. More than 20,000 contracts traded in total, compared with fewer than 9,000 in an average session.
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