Put seller sees floor under Auxilium

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Auxilium Pharmaceuticals has been range-bound since falling sharply last year, and one trader is betting that shares will not collapse to multi-year lows.

A block of 5,000 September 12.50 puts was sold for $0.60 yesterday, according to optionMONSTER's tracking systems. Open interest in the strike was just 51 contracts before the session began, so this is clearly a new position.

The put seller is counting on the stock stay above $12.50 through expiration in mid-September, a level not seen since March 2007. If it falls below that strike price, the trader will face the obligation to buy shares at an effective price of $11.90 when the credit from the put sale is included. (See our Education section)

AUXL fell 1.61 percent yesterday to close at $18.30, just below its 50-day moving average. The drug maker had been trading above $25 in early October but gapped down a month later after missing third-quarter estimates, and shares have been trapped between about $17.50 and $19.50 since then.

Yesterday's put selling made up almost all of AUXL's total volume of 5,082 contracts, which was 4 times its daily average in the last month.

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