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Bearish trade before Elan earnings

Chris McKhann (chris.mckhann@optionmonster.com)

Irish pharmaceutical firm Elan is attracting a large bearish position ahead of its earnings report this morning.

A trader bought 15,000 August 13 puts for the ask price of $0.20 and sold the same number August 15 calls for their bid price of $0.15, according to optionMONSTER systems. Volumes were above the previous open interest in each strike, indicating new activity.

This combination trade cost just $0.05 to open. It is likely a protective collar on a long position in the stock but could also be an outright bet that shares will drop below $13 by expiration in mid-August. (See our Education section)

ELN fell 0.91 percent yesterday to close at $14.10. Shares were down below $12 going into the end of May but have been trading sideways since the start of the month, right around the $14 level.

The Dublin-based company is scheduled to announce second-quarter results today at 8:30 a.m. ET.

Total option volume in the name was 57,888 yesterday, 5 times the daily average for the last month.

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