Option trading investors are watching the action in Amgen and SanDisk.
The drug maker Amgen (NASDAQ: AMGN) has been dropping but one trader remains bullish.
The AMGN January 2013 option contracts are leading the activity: Blocks of 4,540 each of the 50 puts and 60 calls trade, both well above open interest. OptionMONSTER’s Heat Seeker tracking program shows the trader bought 4,200 of the calls for $3.87 and sold the same number of the puts for $5.92 at the same time.
It resulted in a credit of $2.05, which will be kept if AMGN remains between the strikes. Above $60, he or she will make money. They face losses below $50, so the position is similar to owning shares.
Overall AMGN options volume is about twice the average level so far today. AMGN fell 0.59 to $52.47 in morning trading. It peaked at high as $54.70 last week.
Find more option analysis and trading ideas at Option Trading Strategies.
SanDisk (NASDAQ: SNDK) has been in a steep decline for the last month, and one trader is looking for more of the same.
SNDK closed yesterday at $42.90, down 1.36%. The maker of computer-memory chips has fallen from above $53 in February but is holding its ground above last week’s lows.
Leading the options volume this morning is SNDK July 37 Puts. OptionMONSTER’s Depth Charge tracking system shows 2,500 contracts were bought for $1.79 and another 250 for $1.83 as the underlying price fell. This volume is almost three times the previous open interest, so these were new opening positions.
Between these two options trades we see two large blocks of stock going off with 33,900 bought for $43.22 and another 60,000 bought for $43.27. It is highly probable that the puts were bought against long stock, creating a long volatility position that can potentially profit if shares rise or fall, as long as the move is great enough that the realized volatility is greater than the implied volatility of the options.
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