something going on with ITMN options

Discussion in 'Options' started by jgold310, Jan 26, 2009.

  1. jgold310


    The stock is trading at $11 and the feb 20 calls are trading at $2 bucks. Volatility is extremely high.
  2. MTE


  3. Intermune-ITMN straddles expensive into data
    Jan 26 at 13:38
    Profile hits: ALL
    Company Symbols: ITMN

    ITMN is recently up 36c to $11.36. ITMN's Pirfenidone Capacity data is expected soon. Thomas Weisel
    has a $26 price target on ITMN. ITMN call option volume of 3,352 contracts compares to put volume of
    1,099 contracts. ITMN February 12.5 straddle is priced at $8.70, April 12.5 straddle is at $11.20 and
    July 12.5 straddle is priced at $13.80 according to Track Data, suggesting large price movement.
  4. The bid/ask spreads on those July 12.5 calls isn't exactly good:

    $360 bid / 610 ask

    That's one reason the straddle is so expensive, just viewing it at the ask price. If inbetween prices were used, it would look somewhat cheaper (still expensive though)

    BTW if one were to buy a 12.50 straddle for over $1300, you better hope the stock goes up - this would be one case where a straddle can't make you money on a big move down (stock goes to $1 - the call with be worthless, the 12.5 put will be $1150).

  5. Why would anyone want to buy this straddle when the break-even price requires the stock to more than double?

    Sure profit is possible, but are the odds right for taking this gamble? Not to me.

  6. Mark,

    I have no idea either. Of course, if the stock shot up to say $100, it would look like a good move then.

    My point was that where a straddle normally helps one to profit in a big move up or down, in this case, your big move down would be shot as even the stock going to 0 would do no good.