Cubist Pharmaceuticals is testing long-term highs, and one investor is sticking around for more upside.
optionMONSTER's Heat Seeker monitoring program detected the purchase of 1,923 August 41 calls for $1.85 and the sale of an equal number of November 43 calls for $2.20. Volume was below open interest in the 41s but not the 43, which indicates that an existing short position was closed and rolled to the higher contract.
The investor probably owns shares in the drug maker, which is up 33 percent in the last year. He or she apparently sold the August contracts at an earlier date to reduce their risk. (See the discussion of covered calls in our Education Section .) Now that the stock has pushed above the strike, the trade was adjusted to prevent being forced out of the position at August expiration on Friday.
CBST fell 0.12 percent to $43.22 and is hovering near a 12-year high established in March. Rolling the short calls raised by $2 the level at which the investor will sell shares. It also paid them a credit of $0.35 and locked them into an additional three months in the trade.
The transaction pushed total option volume in the name to 26 times greater than average in Friday's session.
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