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Theravance trader looks to protect gains

Chris McKhann (chris.mckhann@optionmonster.com)

Theravance has gapped higher with regulatory progress for its respiratory drug, and one trader wants to lock in gains.

optionMONSTER systems show that a trader bought 2,150 May 29 puts and sold the same number of May 35 calls, with both transactions going for $1.80. This is clearly a new position, as the previous open interest in each strike was just 1 and 29 contracts respectively.

The trade appears to be a zero-cost collar designed to lock in stock gains above $29. In exchange for this protection, the trader gives up any upside beyond $35. (See our Education section)

THRX is up 15.92 percent to $32.47 this afternoon after topped out at $33.31 earlier in the session, its highest levels since 2007. The stock spiked higher in the pre-market after a Food and Drug Administration panel recommended approval of the company's BREO Ellipta respiratory treatment. Shares were down at support at $20 in late February.

More than 15,000 THRX options have already changed hands today, compared to a daily average of about 1,800 in the last month.

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