What's behind call activity in Acadia

optionMONSTER

Acadia Pharmaceuticals has been explosive, and one investor is using options to smooth the ride.

Our Heat Seeker monitoring program detected the purchase of 30,000 January 2015 12 calls for $4.04 and the sale of an equal number of January 2015 15 calls for $2.64. Volume was below open interest in the 12s, so there are two possible explanations of the activity.

One is that he or she owns shares and had previously sold the 12s as part of a covered call strategy. He or she may have then closed that position and rolled it to the higher strike, in the process raising their eventual sale price by $3.

Alternatively, both halves of the trade may have been opened, in which case it was a bullish call sprea d with a maximum potential profit of 114 percent on a move to $15. Either way, they paid $1.40 and see shares pushing above $12 and toward $15 over the long-term. (See our Education section.)

ACAD is down 1.95 percent to $12.08 in midday trading. The pharmaceutical company is up more than 700 percent in the last year amid strong results for its Pimavanserin Parkinson's drug.

Total option volume is 7 times greater than average in the stock so far today, according to the Heat Seeker. Calls outnumber puts by more than 300 to 1.

More From optionMONSTER

Rates

View Comments (0)