By Jud Pyle, CFA, chief investment strategist for the Options News NetworkInvestors looking to buy call options in Vanda Pharmaceuticals ( VNDA - Get Report) have a plentiful supply, thanks to at least one call seller boosting volume today. At the close of today's session, more than 12,500 out-of-the-money September 12.5 calls changed hands vs. open interest of 106 contracts, indicating investors traded these options to open. The calls dropped 10 cents on the day to $1.15 per contract, and the stock closed up 16 cents, or 1.5%, to $10.80 a share, suggesting the majority of this action occurred on the sell side. Normal daily options volume in VNDA is 1,600 contracts. The call-selling action we saw today far trumps normal options volume. Investors who shorted these calls are looking for the stock to close lower than $13.65 at September options expiration. This is a moderately bearish strategy because the trade accounts for potentially 26% of upside for the position to turn profits. The September 12.5 calls closed with an implied volatility of 53, compared to a 30-day historical volatility of 36%. Call-selling activity such as this does not mean investors should run out and sell their VNDA shares. The company did not report any significant news today that could have instigated this call-selling activity, but at least one investor expects limited upside in the stock throughout the later term. Jud Pyle is the chief investment strategist for Options News Network and the portfolio manager of TheStreet.com Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for TheStreet.com.
TheStreet’s Fundamentals of Investing Course will teach you the keys to making the right decisions in any market.
TheStreet’s Personal Finance Essentials Course will teach you money management basics and investing strategies to help you avoid major financial pitfalls.
TheStreet Courses offers dedicated classes designed to improve your investing skills, stock market knowledge and money management capabilities.
More from Options
Fed's Greater Responsibility, Markets Move Sideways, Trading RH: Market Recon
The FOMC simply must act in order to make some kind of sentient attempt to repair the yield curve.