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Trade sees Insmed on solid ground

David Russell (david.russell@optionmonster.com)

Insmed has been rising, and one investor is squeezing income from the move.

optionMONSTER's tracking programs detected the sale of 2,000 July 19 puts for $1.07 and the purchase of 2,000 July 16 puts for $0.22. Volume was below open interest at the lower strike, which suggests an existing short position was closed and rolled up.

Selling puts lets investors earn income in return for insuring other traders against a drop. If the stock remains above the strike price, they'll keep the premium and the contracts they sold short will expire worthless. But they're at risk of potentially big losses if shares decline. (See our Education section)

INSM is up 0.16 percent to $19.04 in midday trading and has risen 50 percent in the last month. Most of that move came after the Food and Drug Administration designated its Arikayce lung drug a breakthrough therapy, which opens the door to potentially quicker approval.

Today's option trader apparently sold the July 16 puts when the stock was lower and has now made money on the bet. Rolling up to the 19 let him or her collect an additional $0.85 and raises the level at which they must get long by $3.

More than 4,800 contracts have traded so far in the session, more than triple INSM's daily average for the last month.

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