Call selling sees cap on Savient gains

A trader is betting on limited upside in Savient Pharmaceuticals as the stock trades below $1.

SVNT is up 6.2 percent, but that is just $0.05, as it trades at $0.81. The drug maker hit a 52-week low of $0.66 at the start of the month and has traded lower from above $8 in the last year.

The option volume tops 13,000 contracts, about 6 times the daily average. Almost all of the action was in the December 1 calls, which were sold 12,000 times for the bid price of $0.15, according to optionMONSTER's systems. Open interest at the strike was just 321 contracts at the start of the day, so this is a new position.

The calls could have been sold naked as a bet that SVNT won't see upside through the end of the year. But it is more likely that these options were traded against long shares as a covered call position, which would take a maximum profit with SVNT at or above $1 at expiration but would not partake in further gains above that strike price. (See our Education section)

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