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Medivation draws bullish 3-way play

Chris McKhann (chris.mckhann@optionmonster.com)

Biopharmaceutical company Medivation isn't participating in the broad market rally today, but one large option trade is bullish.

More than 8,800 MDVN options have traded already this morning, compared to a daily average of 1,300 in the last month. Almost all of the action is in a three-way spread.

A trader sold 2,750 December 52.50 calls for $3.30 against open interest of more than 3,600 contracts. At the same time, he or she bought 2,750 January 55 calls for the ask price of $3.70 and sold the same number of the January 65 calls for $0.40. The volume at each of those strikes was more than open interest, and the bid/ask spread is wide at all three strikes.

The trade is a roll out of the December calls and into the January call spread . The transaction was done for even money and allows the trader to capture any further gains in MDVN up to the $65 level. (See our Education section)

MDVN is down 0.56 percent on the day at $55.02. The stock bounced off support at $44 a month ago and has been climbing since, but it hasn't regained the highs from early October when it was above $58.

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