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Call strategy wagers on Rigel rebound

David Russell (david.russell@optionmonster.com)

One investor apparently thinks that Rigel Pharmaceuticals is ready to bounce after a major drop last year.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 2,010 June 10 calls for $1 and the sale of an equal number of June 15 calls for $0.15. Volume exceeded the previous open interest at each strike, indicating that these are new positions.

The trade cost $0.85 and will earn a maximum profit of 488 percent if the drug developer closes at or above $15 on expiration. (See our Education section for more on the strategy, which is known as a bullish call spread because it leverages a move between two prices.)

RIGL is up 0.52 percent to $6.74 in morning trading and has been holding its ground since mid-December. That's when a clinical study showed that the company's fostamatinib drug lagged competition in the treatment of rheumatoid arthritis.

The stock gapped lower on that announcement but has been holding long-term support ever since. Today's call spread lets the investor place a cheap bet on a big rebound, limiting the amount of money that would be lost if it makes new lows.

Total option volume is 12 times greater than average so far today, according to the Heat Seeker. Calls outnumber puts a by a bullish 13-to-1 ratio.

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