VIVUS Options Signaling Huge Move (VVUS)

Posted in Options 
July 11th, 2010

VIVUS, Inc. (NASDAQL VVUS) shares closed up strong on the week with a 21% gain despite a somewhat soft move Friday.  An analyst call from Wedbush and a downgrade the following day ahead of the FDA review next week.  The difference is that Wedbush believes the stock is a potential double.  The biggest action is actually not even in the stock.  The stock options activity speaks wonders.  See below, with the call and put strike prices, the price, and the contracts traded versus the open interest:

CALL$        Contracts    O.I.
10.00 at $3.90   925    16,989
11.00 at $3.40     1,071    8,851
12.00 at $2.70     4,884    10,380
13.00 at $2.20   2,577    14,644
14.00 at $1.80   1,946    5,394
15.00 at $1.35     3,884    15,931
16.00 at $1.00     2,333    7,662
17.50 at $0.70   3,189    12,737
20.00 at $0.30     7,060    13,181
PUTS$       Contracts    O.I.
5.00 at $0.35     3,813    22,222
6.00 at $0.65    13,759    3,509
7.00 at $1.10     6,738    22,675
8.00 at $1.50      2,882    6,619
9.00 at $1.90     5,388    15,316
10.00 at $2.45     2,389    10,105
11.00 at $2.90     599    3,166
12.00 at $3.30     1,478    869

Making a synthetic speculative straddle with the $12 CALLS and the $11 PUTS for July shows just how expensive it is and how much of a move there could be depending upon the FDA panel review.

That synthetic speculative straddle would cost $5.60, meaning the stock would have to go under $5.40 or above $17.60… In short, the stock is apt to see a hell of a move this week.

JON C. OGG

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