Idenix meltdown attracts bearish play
Idenix Pharmaceuticals hasn't stopped falling, and investors are getting nervous.
optionMONSTER's Depth Charge tracking system detected the purchase of 2,894 May 7.50 puts for $0.62 and the sale of an equal number of May 10 calls for $0.77, resulting in a credit of $0.15. Volume was more than twice open interest at both strikes.
The position will make money from IDIX pushing lower in the next six weeks but, unlike a short sale, it will track movements in the stock less closely as expiration approaches. It forces the trader to sell shares for $10 if they rally to that level and locks in a minimum selling price of $7.50. Including the credit, those levels would respectively be $10.15 and $7.65.
This could be the work of an investor who owns the stock and wants to hedge against a collapse, in which case it would be known as a collar . He or she may also be placing an outright bearish wager. (See our Education section)
IDIX fell 12 percent to $9 yesterday after Brean Murray said the company's IDX183 hepatitis C compound could be less useful than initially expected. The stock had exploded higher on Jan. 9 after positive Phase 2 trials but then stalled around $15 and has been trending lower since.
Overall option volume in the name was 7 times greater than average in the session.
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