By David Russell of OptionMonster
NEW YORK -- Infinity Pharmaceuticals (INFI) has tumbled since the spring, but Tuesday the bulls were back in the name.
OptionMonster's trade scanners detected heavy buying in the December 15 calls, with large chunks pricing for $1.90 about halfway through the morning session. Buyers also targeted the November 15 calls for $1.05 around the same time.
These calls lock in the price where shares can be purchased, providing an inexpensive way for investors to benefit from a rally without buying the stock directly. The options also have the potential to generate significant leverage, but they will expire worthless if shares remain below $15.
Infinity's stock was up barely 2% when the trades hit, but it then started climbing and ended the session at $14.64 for a gain of 5.02%. The calls performed even better: The December contracts rose 37 % to $2.60, and the November options jumped almost 50% to $1.55.
The stock peaked above $50 in early April but closed below $14 on Monday. That's the same level where shares hit resistance in April and May of 2012, which could make some chart watchers think that the stock is finally attractive again.
More than 4,200 November 15s traded Tuesday, while the December 15s saw volume of more than 3,300. In another bullish trade, investors sold the December 13 puts and bought the December 16 calls.
Total option volume in the name topped 13,700 contracts Tuesday, roughly seven times its daily average for the last month.
Russell has no positions in INFI.