How one large bull is playing Amarin
Amarin fell hard last month, but one investor apparently believes that the long-term trend remains bullish.
optionMONSTER's Heat Seeker monitoring program detected the purchase of 10,000 January 2014 10 calls for $2.08 and the sale of an equal number of January 2014 17 calls for $0.70. Volume was more than triple open interest at each strike, indicating that a new position was initiated.
The trade cost $1.38 and will earn a maximum profit of 407 percent if the drug maker climbs to $17 or higher over the next year. It's known as bullish call spread because it leverages a move between two price points. (See our Education section)
AMRN is down 1.77 percent to $8.32 in afternoon trading and has lost 45 percent of its value in the last six months. Much of that drop occurred on Dec. 7 after the company borrowed money under a variable-rate hybrid instrument for as much as 14 percent.
The money will be used to help the company market its Vascepa cholesterol drug. Traders reacted bearishly because it signaled that AMRN might not be acquired as hoped, and because of the potential difficulty of marketing a drug without a larger partner.
Since then, however, AMRN has been holding its ground around $8. That could be leading some investors to think that it's now due for a bounce. Some bulls already doubled their money with short-term weekly options last week.
More than 28,000 contracts have changed hands in the name so far today, which is already more than 5 times the average daily amount. Calls outnumber puts by almost 29 to 1.
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