The stock is trading at $11 and the feb 20 calls are trading at $2 bucks. Volatility is extremely high.
InterMune investors are anxiously awaiting findings from two clinical trials that may yield the first blockbuster drug in the company's history. Within the next week or two, the Brisbane, Calif.-based drug maker is expected to release results from two phase III studies that are testing the drug pirfenidone in patients with idiopathic pulmonary fibrosis, a progressive and fatal lung disease... This pretty much explains the high IV.
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.
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). JJacksET4
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. Mark
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. JJacksET4