GXDX – Genoptix, Inc. – Shares of the specialized laboratory service provider engaged in delivering personalized and comprehensive diagnostic services to community-based hematologists and oncologists plunged 25.79%, crashing straight through its now defunct 52-week low of $21.75, to reach a new low of $16.98 with just over 10 minutes remaining before the closing bell. The firm’s shares plummeted after the California-based company said it expects second-quarter net income of $0.30 per share, which disappointed analysts expecting an average of $0.40 a share. One bearish options investor took advantage of Genoptix’ hemorrhaging shares by initiating a credit call spread in the August contract. The trader appears to have sold 2,000 calls at the August $17.5 strike for a premium of $1.80 each, spread against the purchase of the same number of calls at the higher August $22.5 strike for a premium of $0.50 apiece. The investor pockets a net credit of $1.30 per contract, and keeps the full amount as long as shares of the underlying stock do not rally above $17.50 ahead of expiration day. The parameters of the transaction dictate maximum potential profits of $1.30 per contract, however, potential losses faced by the responsible party sum to a maximum of $3.70 per contract if GXDX shares rebound sharply and exceed $22.50 by August expiration. Losses start to accumulate for the investor if shares rally 10.6% from the current price of $16.98 to breach the effective breakeven price of $18.80 by expiration day in August.
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.
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