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How trader is collaring Onyx Pharma

Chris McKhann (chris.mckhann@optionmonster.com)

A combination trade appears to be "collaring" Onyx Pharmaceuticals a day after it rejected a bid from Amgen and fueled speculation of a bidding war.

ONXX is up another 2.18 percent to $134.19 after hitting an all-time high of $134.90 this morning. The drug developer skyrocketed to $131 yesterday from just below $87 at Friday's close.

optionMONSTER systems show that a trader has purchased 5,000 January 110 puts today for $3.10 against open interest of 5,025 contracts. At the same time, he or she sold 5,000 January 150 calls for $3.20 with no open interest at that strike.

This is very likely a collar designed to hedge against a pullback in a long stock position. The trader gives up any gains beyond that $150 level in exchange for protection if shares fall back below $110. The collar cost just $0.10 to establish.

More than 23,000 ONYX options have traded so far today, already 5 times its daily average for the last month.

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