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Onyx put selling hinges on time decay

David Russell (david.russell@optionmonster.com)

One investor wants to turn time into money using Onyx Pharmaceuticals.

optionMONSTER's tracking systems detected the sale of 2,000 August 21 puts for $0.45 against open interest of just 20 contracts. The trade accounted for almost all the activity in the drug developer to far today.

ONXX is up 0.52 percent to $44.18 today and more than 40 percent in the last three months amid enthusiasm about its cancer drugs. Its regorafenib compound showed positive results against metastatic colorectal cancer in a Phase 3 clinical trial, according to data released in late October.

It got another boost one month later when Bloomberg reported that the company may seek a buyer. (See researchLAB for more)

Today's put seller hopes that ONXX will hold its ground through the summer. If that holds true, the contracts will expire worthless and he or she will keep the premium. The trader is obligated to buy ONXX for $21 if it falls below that level, so there is downside risk if the stock falls.

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