U.S. Markets closed

Bearish 3-way bet in Seattle Genetics

Chris McKhann (chris.mckhann@optionmonster.com)

A bearish trade dominates today's option activity in Seattle Genetics.
Total option volume in SGEN is 9,085 contracts so far, compared to a daily average of just 572 in the last month. Virtually all of the volume is in one three-way put combination.

optionMONSTER systems show that a trader bought 3,000 September 25 puts for the ask price of $1.60 and, seconds later, sold 3,000 September 20 puts for $0.45 to create a vertical spread . He or she then sold 1,800 September 35 calls for $1.20 and another 1,200 for $1.25. The volume at all three strikes was multiples of the open interest, so this is a new position.

The bearish strategy will take a maximum profit if SGEN is at or below $25 at expiration, while the trader risks having to sell shares above $35. This could also be a collar to protect long shares, at least down to that lower strike. (See our Education section)

SGEN is down 2.24 percent to $29.62 this morning, its lowest level since early March. Shares of the biopharmaceutical company were up to $39 toward the end of April but have been trending lower since retesting that level in mid-May.

More From optionMONSTER