One investor apparently believes that the upside is limited in United Therapeutics after a selloff last month.
optionMONSTER's trade monitors detected the sale of 1,000 December 47.50 calls for $2.96 and the purchase of an equal number of December 55 calls for $0.69. Volume was more than 7 times open interest at both strikes.
The investor collected a credit of $2.27, which will be kept as profit if the drug stock closes at or below $47.50 on expiration. Gains will erode above that level, turning to losses over $49.77, and the maxium loss of $5.23 will occur at $55 or higher.
Known as a call credit spread , the trade is an example of a market-neutral strategy that makes money from a sideways move rather than a rally or drop. In the case of today's position, the trader is hoping for a modest decline, but most of the money will be made from time value melting out of the 47.50 contracts. (See our Education section)
UTHR is up 0.33 percent to $48.33 in early afternoon trading. The biotechnology company was above $50 last month but cratered on Oct. 24 after announcing that the Food and Drug Administration had rejected an extended-release version of its treprostinil hypertension drug.
The shares have tried to bounce more recently, but today's credit spread is betting against further gains. Overall option volume is more than twice the daily average in the name, according to our data systems.
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