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Trade sees Astex on solid ground

David Russell (david.russell@optionmonster.com)

Astex Pharmaceuticals broke a key resistance level last earlier this month, and traders think there is no going back.

optionMONSTER's monitoring systems detected the sale of 5,000 July 3.50 puts for $0.38. Previous open interest was just 4 contracts, indicating that a new position was initiated.

The investor is now on the hook to buy shares of the drug developer for $3.50 if they fall to that level by expiration. But if it remains above it, he or she will keep the premium collected and the puts sold short will expire worthless. The strategy is commonly used when traders like a stock but don't want to expend capital upfront getting long. See our Education Section for more ideas on how you can turn time into money with options.

ASTX rose 1.35 percent to $4.13 in morning trading, and is up 38 percent in the last month. Most of that gain came after the company reported fourth-quarter earnings of $0.05 a share on Feb. 25, crushing the expectations of analysts who expected breakeven results. The move brought the stock back to levels last seen in late 2007, and triggered bullish alerts on stockMONSTER's researchLAB analytics tool.

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