Someone wants to turn time to money with Actavis.
optionMONSTER's tracking programs detected the sale of 3,500 June 285 puts for $7.29 and the purchase of an equal number of June 280 puts for $5.89. Volume was more than 17 times the previous open interest at both strikes, which indicates that new positions were initiated.
The trade yielded a credit of $1.34, the investor's maximum profit if the drug maker remains above $285 through expiration. He or she can lose a maximum of $3.66 if the stock drops to $280 or lower.
Known as a put credit spread , the strategy generates income from selling contracts closer to the money and uses the cheaper ones to hedge against a drop. (See our Education section for more on the benefits of writing protection to profit from time decay .)
ACT rose 1.06 percent to $298.36 yesterday and is up 16 percent so far this year. It's grown by acquiring other companies including Allergan, Warner Chilcott, and Durata Therapeutics. The stock peaked around $285 in January and has held above that level since, which could make some chart watchers confident to sell puts below it.
The next set of quarterly results are due on May 11. Yesterday's total option volume in the name was triple its daily average.
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