U.S. Markets closed

What's behind put selling in Vertex

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Vertex Pharmaceuticals has been trapped in a tight range recently, and traders are betting that any downside will be limited in coming months.

optionMONSTER's tracking systems detected the sale of 6,990 April 43 calls this morning, led by a print of 5,695 that went for $3.98. This is clearly new positioning, as open interest in the strike was a mere 248 contracts before today's trading began.

These short puts are betting that VRTX will stay above $43 through expiration in mid-April, a level where it was trading at the beginning of this year. If the stock falls below that strike price, the trader will face the obligation to buy shares at an effective price of $39.02 once the credit from the put sale is factored in. (See our Education section)

VRTX is up 1.03 percent to $45.28, just above its 50-day moving average. The stock fell sharply after hitting resistance at the $60 last October but has been trading in a tight range between about $45 and $47 for the last month.

Today's put selling made up the vast majority of the option volume in the name, which totals 7,459 so far. That is already well above its full-session average for the last month.

More From optionMONSTER