Mannkind Draws Bet on Big Upside Move

By Mike Yamamoto, managing editor of OptionMonster.

VALENCIA, Calif. (TheStreet) -- Shares of MannKind(MNKD Quote) have seen some wild swings recently and one institution-sized trader is making a big bet that the drug company will snap back up by 50% before mid-May.

OptionMonster's real-time tracking system detected a large block of 7,000 May 7.50 calls bought for $2.50 on Wednesday. The in-the-money calls dwarfed the average volume of 17 a day at the strike and were 19 times the open interest of 366 contracts, thereby reflecting newly opened positions.

The stock rose 1.37% to $6.67 Wednesday. For the May 7.50 calls to turn a profit, the stock would need to at least rise 50% to $10 or more before the options expire on May 14.

That may seem like a huge gamble at first blush, but shares of the biopharmaceutical company have been on a roller-coaster ride since Labor Day, soaring 67% to over $12 in the first three weeks of September but then plummeting to $5 less than a month later. Not surprisingly, implied volatility spiked to 274% by mid-October.

The company reported a narrower-than-expected third-quarter loss at the beginning of the month. MannKind's next scheduled event is a presentation at the Lazard Capital Healthcare Conference on Nov. 17 along with other pharmaceutical firms such as Alkermes(ALKS Quote), which is also seeing bullish options activity.