Diabetes decision fuels option action


It's likely to be another active day in the options of Amylin Pharmaceuticals and Alkermes as traders prepare for a big decision from the Food and Drug Administration tomorrow. Volumes have been surging in both companies, which stand to benefit from the approval of a long-acting diabetes treatment that needs to be taken only once a week, versus twice a day. Some 65,320 contracts traded in AMLN yesterday, more than triple the average level, while activity was twice normal in ALKS. The stocks have been rallying into the news and have recently hit new 52-week highs. That's pushed up the cost of options in both names as shareholders look to protect their positions from a potentially negative decision from the FDA. Implied volatility in AMLN is now quoted at 117 percent, more than twice the 49 percent historical volatility over the previous 30 sessions. In ALKS the premium is even richer, with implied volatility at 94 percent versus the 36 percent historical reading.

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Diabetes decision fuels option action