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MannKind attracts huge call strategy

Chris McKhann (chris.mckhann@optionmonster.com)

An enormous call trade tops today's option activity in biopharmaceutical company MannKind as takeover speculation rises.

optionMONSTER systems show that a trader bought 29,864 January 5 calls for the ask price of $1.98 in volume below previous open interest of more than 111,000. Seconds later, he or she sold the same number of January 9 calls for the bid price of $0.83 against open interest of just 1,380 at that strike, clearly indicating new activity.

This could be a new vertical spread that is looking for MNKD to trade up to the $9 area. Or this could be a trader rolling short calls, buying back the contracts at the lower strike and selling new ones at the higher level, possibly in conjunction with long stock in a covered call strategy. (See our Education section)

MNKD is up 14.74 percent to $6.15 after peaking at $6.54 this morning, its highest level since the stock was cut in half in January 2011. Shares were down at $2 at the end of 2012 but have doubled since the start of March.

More than 657,000 options have changed hands so far, already 2.7 times its daily average for the last month. Calls make up 63 percent of that volume. 

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