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.
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