Unusual Options Activity Review for CV Therapeutics
CV Therapeutics (CVTX)
CV Therapeutics (CVTX) gained 4.9 percent to $11.71 and options volume rose to 7 times the typical levels Wednesday. April 10 and 15 calls saw increases in open interest of roughly 5000 contracts after an investor apparently opened a substantial bullish spread on the biotech company. With CVTX trading for $11.11 midday, 4800 April 10s hit at the offer for $2.30 while 4,800 April 15s traded on the bid for $.35.
If this is a bull call spread, the strategist is looking for CVTX to continue its recent run higher. They paid $1.95 (excluding commissions) and have a potential payoff of $3.05 if shares rally to $15 or more by the April options expiration.
In biotech companies, traders sometimes use spreads instead of shares to play FDA or other one-time events because the total risk is predefined when the spread is initiated. In this case, the maximum risk occurs if CVTX falls back below $10, both calls expire worthless, and the strategist loses the debit ($1.95) paid to enter the spread.
"
About Frederic Ruffy
Frederic Ruffy is a Freelance Writer and Options Trading Strategist. In addition to writing market commentary and trading-related books and articles, Fred has also worked as an instructor, educating investors on advanced topics like measuring volatility, the benefits of sector rotation and the risks and potential profits from trading around earnings. His market observations are mentioned frequently in the financial press and he currently trades stocks, futures, and options in Salt Lake City, Utah.
View Frederic Ruffy's post archive >
