ARIAD Pharmaceuticals Inc. (ARIA) is a global company focused on developing medicine for cancer patients. The company’s stock is currently trading around $3.90 in a 52 week range of $2.15-$24.59. The stock has had a rough year with shares losing over 80% of their value year to date. Despite the weakness the stock has shown this year a trader has decided to make some very bullish bets on ARIA today. Earlier in today’s trading session a trader sold 5,000 ARIA Dec 3 puts for $0.12. This block represents volume over 3 times the average daily option volume in ARIA. Short puts also carry a large amount of risk meaning this trader has a relatively high level of conviction. Essentially this trader is betting the stock will be above $3.00 on December expiration which is 28 days from now. Although the stock is trading in bearish territory technically we believe this order is large enough to serve as a signal for a covered call set up in ARIA.
Trade: Buying 100 Shares of ARIA at $3.90 for every Dec 3 Call sold at $1.05
Reward: $15 per 1 lot
Breakeven: $2.85
If shares of ARIA close above $3.00 on December expiration this trade will net its maximum potential profit of $15 per 1 lot. This trade will also be profitable anywhere above $2.85. Should the stock close above $3.00 on expiration this trade will net an annualized return of 96.1%
