IB Options Brief: AMAG Pharmaceuticals, Inc. (AMAG) & A123 Systems, Inc. (AONE)

Posted January 24th, 2012 by Caitlin Duffy in Unusual Activity

AMAG ñ AMAG Pharmaceuticals, Inc.
Call activity on the biopharmaceutical company today might have looked bullish at first glance, particularly earlier in the session when shares in the name were still positive on the day. AMAGís shares rose 1.8% to an intraday high of $15.98 this morning, but have since slipped into negative territory, down 0.30% at $15.65 as of 1:50 p.m.

One investor positioning for shares in AMAG to continue to decline appears to have initiated a synthetic put on the stock. The trader likely sold 148,800 shares of the underlying at $15.6297 each and purchased 2,300 in-the-money calls at the May $15 strike for a premium of $2.40 apiece. The long calls offer upside protection should the stock rally ahead of expiration, while gains on the short stock may amass if the price of AMAGís shares continues to slide.

AMAG Pharmaceuticals was cut to ëunderweightí from ëneutralí with a reduced share price target of $12.00 from $20.00 at JPMorgan on Monday. The biopharmaceutical company reports fourth-quarter earnings ahead of the opening bell one month from today.

AONE ñ A123 Systems, Inc.
The maker of rechargeable lithium-ion batteries and battery systems popped up on our ëhot by options volumeí market scanner this morning due to heavier-than-usual activity in AONE puts. Shares in A123 Systems fell 3.05% to $2.22 this afternoon, but put selling in the September expiry suggests one strategist expects the stock to exceed $2.00 through expiration.

The trader appears to have sold around 1,000 puts at the Sept. $2.0 strike for an average premium of $0.47 per contract. The investor walks away with the full amount of premium at expiration as long as shares in the name settle above $2.00. AONEís shares traded below $2.00 as recently as January 5. A123 Systems, Inc. reports fourth-quarter earnings ahead of the opening bell on February 28.

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