InterMune Volatility Compression (ITMN)
InterMune Inc. (NASDAQ: ITMN) has shown some very interesting options trading, and the trading looks to be a bet against all that huge volatility we have seen.
Joe Kunkle of OptionsHawk.com noted:
- ITMN with a 2,000X4,000X2,000 contract butterfly call spreads at the March $25/$30/$35 strikes. This trade bets on volatility to collapse, which will happen after the March 9th FDA meeting on it’s lung drug pirfenidone, given priority review for treating the chronic lung disease idiopathic pulmonary fibrosis, a disease impacting around 200,000 people in the US and Europe. Lazard Capital feels there is more than a 50% chance the drug gets approved, and has a $25 target for shares. However, the FDA may require post-approval studies for indications of effectiveness. It also sees shares doubling to $30 , currently trading at $15. The trade cost a debit of 50 cents, and offers profit from $25.50 to $34.50 in shares, with max profits at the $30 body strike, which offers around an 800% return. Implied volatility stands near 250% ahead of the event, and the straddle is pricing in around a 55% move in shares. Another large trade today was a buyer of 4,000 March $20 calls at the $2.55 offer. 20,996 calls and 3,348 puts have traded on the day, 8X average call volume.
It is just past noon and InterMune shares are down 4.1% at $14.70 on 975,000 shares. The 52-week range is $10.48 to $18.14 and the average stock volume is about 760,000 shares.
Just last week we saw comments from the company. Chairman and CEO Dan Welch noted, “Fourth quarter and recent events have been highlighted by the very important developments related to the regulatory progress of pirfenidone for the treatment of patients with idiopathic pulmonary fibrosis, or IPF. Our NDA for pirfenidone was granted Priority Review status on January 4, and is scheduled to be discussed at an FDA advisory committee meeting on March 9, 2010. If approved by the FDA, pirfenidone would be the first approved medicine for the approximately 100,000 Americans who suffer from this terrible disease. Regarding Europe, we currently expect to submit a Marketing Authorization Application (MAA) for pirfenidone in the European Union in the current quarter.”
JON C. OGG
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