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Infinity Pharma bulls bet on bounce

David Russell (david.russell@optionmonster.com)

Infinity Pharmaceuticals has tumbled since the spring, but yesterday the bulls were back in the name.

optionMONSTER's Heat Seeker system detected heavy buying in the December 15 calls, with large chunks pricing for $1.90 about halfway through the morning session. Buyers also targeted the November 15 calls for $1.05 around the same time.

These long calls lock in the price where shares can be purchased, providing an inexpensive way for investors to benefit from a rally without buying the stock directly. The options also have the potential to generate significant leverage, but they will expire worthless if shares remain below $15. (See our Education section)

INFI was up barely 2 percent when the trades hit, but it then started climbing and ended the session at $14.64 for a gain of 5.02 percent. The calls performed even better: The December contracts rose 37 percent to $2.60, and the November options jumped almost 50 percent to $1.55.

The stock peaked above $50 in early April but closed below $14 on Monday. That's the same level where shares hit resistance in April and May of 2012, which could make some chart watchers think that the stock is finally attractive again.

More than 4,200 November 15s traded yesterday, while the December 15s saw volume of more than 3,300. In another bullish trade, investors sold the December 13 puts and bought the December 16 calls.

Total option volume in the name topped 13,700 contracts yesterday, roughly 7 times its daily average for the last month.

(A version of this post appeared on InsideOptions Pro yesterday.)

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