Targacept gets a show of support

optionMONSTER

Targacept is up sharply since reporting earnings last week, and traders apparently expect the biopharmaceutical company to hold onto its gains.

optionMONSTER's tracking systems show that 5,510 July 5 puts were sold for $0.30 yesterday, including a single print of 5,000. These are clearly new positions, as open interest in the strike was a mere 15 contracts before the session began.

The put sellers are looking for TRGT to stay above the $5 strike price through expiration in mid-July. If it falls below that level, the traders will face the obligation to buy shares at an effective price of $4.70 once the $0.30 credit from the put sale is included. (See our Education section)

TRGT finished yesterday's session with a gain of 3.29 percent to $5.34, its highest close since March 2012, after reaching a new 52-week high of $5.40 in the morning. The name drew bullish option activity before its first-quarter report on May 7 and spiked higher after those results were released.

Total option volume in the name yesterday was 10 times its daily average.


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