Why one trader is selling Infinity calls


Infinity Pharmaceuticals has been on a tear, and one shareholder apparently doesn't want to abandon the position.

optionMONSTER's tracking programs detected the purchase of 2,000 January 30 calls for $2.35 and the sale of an equal number of January 35 calls for $0.60. Volume was below open interest at the lower strike, indicating that an existing short position was closed and rolled higher.

The trader probably owns shares in the drug developer, which has more than doubled in the last six months. The investor would have sold the January 30s at an earlier date to earn income, thereby agreeing to unload the stock at the strike price if it's above it on expiration at the end of the week.

The investor apparently doesn't want to be forced out of the position, so he or she bought those contracts back and replaced them by writing 2,000 December 35 calls. The transaction cost $1.75, but the trader now has the right to sell shares for $5 more. (See our Education section for more on covered calls )

In a similar trade, a short position in 1,956 January 30 calls were also rolled to the April 35 strike for a net credit of $0.30.

INFI rose 3.80 percent to $29.79 on Friday. The stock first lit up our scanners Seeker last month when the December 17.50 calls were purchased for $3 to $3.30. Those contracts had roughly quadrupled to $12.10 by the end of last week.

Total option volume was 9 times greater than average in the session, with calls dominating the activity.

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