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Dendreon faces large bearish play

Chris McKhann (chris.mckhann@optionmonster.com)

A huge put trade is looking for more downside in biotechnology company Dendreon.

optionMONSTER's Depth Charge system shows that a trader bought 10,000 February 2 puts for $0.32 yesterday, above the listed ask price at the time, and sold two blocks of 10,000 February 1 puts for $0.08 and $0.07.

This ratio spread takes a maximum profit if DNDN is right around $1 at expiration in mid-February. The trade cost $0.17, which is the amount at risk if the stock stays above $2 or spikes higher, as it tends to do on occasion. Another risk is that the trader will be on the hook to buy shares if they fall below $1. (See our Education section)

DNDN finished yesterday unchanged at $2.83. The cancer-drug developer was above $7 at its 52-week high in February but gapped down from the $4.50 level after reporting quarterly results in August.

Yesterday's put spread dominated DNDN's total option volume of more than 37,000 contracts, which compared to a daily average of just 7,743 for the last month.

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