By David Russell
Amylin Pharmaceuticals (AMLN) is up 55% in the last three months, and traders are calling a top.
optionMONSTER's tracking systems detected heavy call selling in the biopharmaceutical company, which gapped higher at the open after regulators said the company's new diabetes drug won't require more testing. The March 22.50 calls were the most active strike, trading more than 10,000 times, with institutional-sized transactions pricing for $0.32 to $0.60.
Traders also unloaded the March 25 calls, mostly for $0.10, and the March 24 contracts for $0.15 to $0.20. Volume in all of the strikes was below open interest, suggesting investors are exiting long positions.
AMLN rose 9.82% to $22.25 in morning trading. The stock has been climbing amid heavy option activity as investors prepared for the Food and Drug Administration's decision on Byetta. While the agency didn't yet approve the medicine, investors reacted positively after it didn't require more testing. The medicine, which will also benefit Alkermes (ALKS) and Eli Lilly (LLY), is important because it will reduce the frequency of treatment for diabetics to once a week from at least once a day.
AMLN shares have now returned to the same level where they traded in September 2008, shortly before the stock market crashed. Chart watchers may consider it a good place to expect resistance, so are taking profits.
The overall activity confirms the view that AMLN's gains will be limited: More calls have been sold than bought, and vice versa for puts, according to optionMONSTER data.
Disclosure: No positions
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