ALKS – Alkermes, Inc. – A three-legged bullish options combination trade enacted on biotechnology company, Alkermes, Inc., this afternoon indicates long-term optimism by one savvy strategist today. Alkermes’ shares are up 1.10% to $11.00 as of 3:12 pm (ET), but earlier rallied more than 4.75% to touch an intraday high of $11.40. The bullish player essentially sold short a chunk of put options in order to finance the purchase of a debit call spread in the November contract. The trader picked up 5,000 calls at the November $12.5 strike for a premium of $1.60 apiece and sold the same number of calls at the higher November $15 strike for $0.65 each. Finally, the third leg of the transaction involved the sale of 5,000 puts at the November $10 strike for $1.35 a-pop. The investor responsible for the trade pockets a net credit of $0.40 per contract, and keeps the full credit received as long as Alkermes’ shares trade above $10.00 through November expiration day. Additional profits accumulate if shares of the biotech firm rally above $12.50, with maximum potential gains of $2.90 per contract – including the credit received today – available to the trader should shares of the underlying stock surge more than 31.5% to exceed $15.00 by expiration.
Affiliation: Interactive Brokers
Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
Interactive Brokers: Interactive Brokers offers direct market access to around 80 electronic global markets from a single account. Successful traders and investors understand that superior technology and lower trading costs can result in greater returns. For 32 years we have been building direct access trading technology that delivers real advantages to professionals worldwide. With consolidated equity capital of US $4.4 billion, IB and its affiliates exceed 1,000,000 trades per day. In addition, our prudent and conservative risk policies make Interactive Brokers a safe haven for your money. Discover some of the reasons why IB, the largest independent US broker/dealer, is the professional traders' and investors' choice.
Visit: Interactive Brokers