GENZ – Genzyme Corporation – One options investor is ready to make money should negotiations regarding a merger between Genzyme and Sanofi-Aventis collapse by October expiration. Genzyme’s shares slipped 1.35% lower this afternoon to stand at $69.25 just before 12:45 pm ET. The trader enacted a bearish debit put spread, buying 5,000 puts at the October $65 strike for an average premium of $2.32 each, and selling the same number of puts at the lower October $50 strike for an average premium of $0.22 apiece. Net premium paid to purchase the spread amounts to $2.10 per contract. Thus, the investor is prepared to make money should Genzyme’s shares fall 9.15% to breach the effective breakeven price of $62.90 by expiration. The trader stands ready to walk away with hefty profits of $12.90 per contract if the price of the underlying stock plunges 27.8% to trade below $50.00 by expiration day in October. The overall reading of options implied volatility on the drug maker is higher by 7.8% to 32.68% in afternoon trading.
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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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