![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh80Za5xCtNbs-cCACu2MIQkwvMFnRaRs-ieXXmbD8vBMOC11Yb0eht_adXp7tasLG2L6cRHrw7ioxGbx4rQ_wa66vig8iB_f9KAJuv-xY9ArK6CBD7wfBcXSWrlibwW2w82N0AMaPQpk0/s400/avnr_summary.gif)
AVNR is a pharmaceutical company focused on acquiring, developing and commercializing therapeutic products for the treatment of central nervous system disorders. They have a PDUFA date Oct. 30, 2010.
The company traded over 27,000 options on total daily average option volume of just 1,072. The largest trade, accounting for ~20,000 contracts was a sale of the Dec 2.5 straddle. The Stats Tab and Day's biggest trades snapshots are included (click either image to enlarge).
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfi1_CKmE-u1TqzbWfV238lev7wbHZGUvRTpUqG2P4zEHaGKYy2BvlLxPatPkpLcckmlhYfjoKQOGVjIsE7T6eGHbjGzHQ2xXAmAjbW1ep87JucnNnyFv0MgQ-mKBUpkWLX8xShNAt89Y/s400/avnr_stats.gif)
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEggWxGdPspVqbcmUNTXgDYHDlAVy8m9gDNarPqfoBjfz_pz7uxJaj0pwgBapRscC80HElaVFGtSxLEqYpNHAvnJK7iYXwivLnLrzi5QPJ3yL5lGhHbZ9QC1On0_mrVT0tOMO4NQ8BJtQXA/s400/avnr_trades.gif)
The Options Tab (click to enlarge) illustrates that the calls were opening (trade size >> OI), while the puts are ambiguous.
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg9UzQR2NxnwW7Q9psq3rUnsSppvSehwXteF5RsEuUEoYKJ3_Zrol2-CSKHpVmPPM8HrSPR8-rMs35duQqoDNsnvFGeMV7hLA-6ejRhJfBsDf_yZwYqiqvxWikVXlLwDqMZoYklADpkk_s/s400/avnr_options.gif)
Note the vols at the top of the tab:
Sep: 82
Oct: 111
Dec: 200
Even without the news about the PDUFA, it's pretty obvious that the options reflect a volatility event after the Oct options. This is an interesting trade in that there is muted risk to the downside of stock.
Trade Stats
Sell 10,000 Dec 2.5 calls @ $1.00
Sell 10,000 Dec 2.5 puts @ $1.05
So on the downside, this breaks even with the stock trading $0.45. Or, in other words, only $0.45 of downside. And, in reality, a stock rarely goes to zero even on catastrophic news, so the downside, is even less. The upside is a different story, naked short and losing after $4.55.
If one were to cover that up with a Dec 5 call purchase for $0.60 the total credit drops to $1.45. The new breakeven range becomes: [$1.05, $3.95]. An alternative could be to sell the Mar'11 2.5 straddle. That vol is is 176 pricing the straddle @ ~$$2.40. If you cover up with the Dec 5 calls (DEC), the credit is ~$1.90.
Bio-techs are super risky, please don't trade this naked or with "meaningful" money if at all.
This is trade analysis, not a recommendation.
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