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Bearish combination targets Myriad

David Russell (david.russell@optionmonster.com)

One investor is nervous about Myriad Genetics as the stock continues to drift in a range.

optionMONSTER's Depth Charge tracking system detected the purchase of 1,000 November 21 puts for $0.57 and the sale of an equal number of November 28 calls for $0.62. Volume was more than 5 times open interest at both strikes.

The trader collected a credit of $0.05 and will make money if the drug maker closes below $21 on expiration. He or she will also be forced to sell shares for $28 if they go that high, although MYGN hasn't seen that price in almost three years.

They're probably using the options to protect a long position in the shares, a strategy known as a collar. It provides wide latitude for price swings, while guarding against a major collapse. See our Education Section for more ideas on how calls and puts can be used to manage risk.

MYGN rose 1.05 percent to $24.99 in late morning trading. It's moving sideways between about $22 and $26.50 all year.

The collar trade pushed total option volume in the stock to almost triple the daily average.

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