Selling major moves in Human Genome Sciences (NASDAQ: HGSI)

Human Genome Sciences (NASDAQ: HGSI) did not announce any notable news today, as the company continues to seek approval for its lupus drug Benlysta, and the company’s shares have hovered around the $30 mark throughout the last few months. One investor sold a near-term strangle expecting minimal movement in the stock even after the company’s earnings report, which could release around Feb. 25.

At 11 a.m. EST, an investor sold a large block of March 26 puts for roughly 83 cents, and simultaneously sold the same number of March 33 calls to collect roughly $1.62 on each strangle sale. The out-of-the-money puts, currently up six cents on the day, are home to current open interest of 1,164 contracts, and the March 33 calls are currently unchanged and home to current open interest of zero contracts. More than 7,600 of each strike have changed hands so far on the day.

HGSI shares are currently down roughly 93 cents, or more than 3%, to $28.89. The investor who sold this strangle is betting that HGSI shares will close between $24.38 to the downside and $34.62 to the upside.

Maximum risk in a strangle sale is unlimited, while maximum gain is limited to the premium collected ($1.62 per strangle in this particular trade). It looks like at least one investor is willing to take on more risk, as the CBOE SPX Volatility Index (VIX) has closed below the 20 mark since Jan. 5.   The strangle seller is betting on a range in HGSI stock, and could lose money if the stock moves significantly in one direction or the other.

For more on HGSI:

Human Genome to ask for Benylsta approval in 2Q

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