IB Options Brief: Vivus, Inc. (VVUS)

Posted March 29th, 2012 by Caitlin Duffy in Unusual Activity

Vivus Call 'Fly In Play

VVUS ñ Vivus, Inc.
A large options trade on Vivus, Inc. appears to be a directional bet on the biotech companyís shares ahead of impending recommendations from an advisory panel, as well as a possible decision from FDA regulators, on whether to approve obesity drug, Qnexa. Shares in VVUS are down 1.5% today at $20.06. The large call butterfly spread purchased on Vivus in the first half of the trading day yields maximum possible gains in the event that shares soar more than 50.0% in the next three weeks.

The options player responsible for the single largest trade in the name today appears to have purchased 3,250 calls at the April $27 and $35 strikes, and sold 6,500 calls at the April $31 strike, all for a net premium of $0.55 per contract. Profits on the call ëfly kick in if shares in VVUS rally at least 37.3% to surpass the breakeven share price of $27.55, while the maximum potential payoff of $3.45 per contract is available to the trader as long as the stock jumps 54.5% to settle at $31.00 at expiration next month. The strategist stands to lose the full amount of premium paid to establish the spread if shares settle below $27.00 or above $35.00. A decision from regulators is expected by April 17th, three days prior to options expiration.

----------------------------------------------------------------------------------

Note: The material presented in this commentary is provided forinformational purposes only and is based upon information that isconsidered to be reliable. However, neither Interactive Brokers LLC norits affiliates warrant its completeness, accuracy or adequacy and itshould not be relied upon as such. Neither IB nor its affiliates areresponsible for any errors or omissions or for results obtained from theuse of this information. Past performance is not necessarily indicativeof future results.

This material is not intended as an offer or solicitation for thepurchase or sale of any security or other financial instrument.Securities or other financial instruments mentioned in this material arenot suitable for all investors. Any opinions expressed herein are givenin good faith, are subject to change without notice, and are onlycorrect as of the stated date of their issue. The information containedherein does not constitute advice on the tax consequences of making anyparticular investment decision. This material does not take into accountyour particular investment objectives, financial situations or needsand is not intended as a recommendation to you of any particularsecurities, financial instruments or strategies. Before investing, youshould consider whether it is suitable for your particular circumstancesand, as necessary, seek professional advice.