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Market Overview

Volume And Volatility Alert: Medicines Company


According to Options and Volatility, shares of Medicines Company (NASDAQ: MDCO) saw unusually high options activity on Thursday. In particular, the October 32 calls traded 5,301 contracts versus only 469 open interest, with October 27 calls seeing above average volume as well.

In addition to the increased volume, the implied volatility on the October 32 calls rose sharply, moving from 54.73 percent on Wednesday's close to 62.27 percent on the close Thursday, an increase of nearly 14 percent. With the stock closing lower on the day by $0.32, the October 32 calls actually increased in price by $0.22. This set up a covered call opportunity, buying shares and selling a October 32 call for each 100 shares purchased.

Options and Volatility noted this captures a 2.61 percent edge and positions bullishly along with the large call buyer. The October 32 calls have a delta of 47, while the covered call position has a similarly bullish delta of 53. Medicines Company has already reported earnings on July 29, with the next earnings not due until late October.

Shares closed Thursday at $30.29, down $0.32 (1.05 percent), with the October 32 calls closing up $0.22 at 2.47.

Disclosure: The author had no position in MDCO at time of publishing.


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