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9:05am (EST)
The market struggled for much of Thursday after a weaker open and briefly made it into positive territory a few times as the bears tried to keep their fingers in the dike. However, by the final hour of trading, the bulls flooded the market with buy orders and the bears ran for the hills.
The Dow managed to pull out a 44 point gain to close at 10,611, its highest level since January 20th. The 2010 high for the index is 10,767 and if we don’t get there today, it sure looks like we will next week.
We have also been talking about the 1,150 level for the S&P 500 and that is exactly where the index closed with its 4 point gain. This level was hit twice at the beginning of the year and was a good sign that the bulls are serious on taking the market higher.
The real deal has been the Nasdaq which set a fresh 52-week high by adding 10 points to close at 2,368. We recently raised our target for the Nasdaq to 2,400 but we may have to raise that again if the Dow and S&P can break through 10,800 and 1,175. If so, then we have mentioned that the Dow could run to 11,000 while the S&P could move towards 1,200 if those two indexes can keep up with Tech.
On Tuesday, we told you about Amylin Pharmaceuticals’ (AMLN, $21.19, up $0.29) big day today and it looks like they could be popping champagne at headquarters. The FDA could approve its diabetes drug Byetta, for which it is partnered with Eli Lilly (LLY, $35.82, up $0.48), to produce.
This will be great news for Amylin if the drug is approved and will be a blockbuster as it should easily do $1 billion in sales, quickly. Byetta would be the first once-weekly treatment in the war against type 2 diabetes.
As you can imagine, there was a tremendous amount of action in the stock as well as the option pits. Over 12.6 million shares traded hands (3X normal volume) but there were plenty of big bets being placed on both sides of the ball.
The March 25 calls (AQM100320C00025000, $0.90, flat) were the flavor of choice for bullish traders as over 22,000 contracts traded hands. As far as the skeptics, they were hoarding the March 15 puts (AQM100320P00015000, $0.70, up $0.20) as volume came in at 25,000 contracts.
Most traders probably played the stock one way, betting for or against approval, but the two aforementioned options could have been used as a strangle option trade. We mention these types of trades from time-to-time but we stayed on the sidelines for this one. It is somewhat of a “chicken trade” or a “safety” play and can be used if you think a HUGE move is possible, either way.
We also mentioned we were watching Alkermes (ALKS, $12.64, up $0.08) which is a company that enables the slow delivery of the drug. No word yet but this breaking news will be hitting the market sometime today.
Retail sales came in better-than-expected and the futures, which were already up, got stronger. As we head to press, the Dow futures are up 36 points to 10,583 while the S&P futures are up 5 to 1,150. The Nasdaq 100 futures are also up 5 points and stand at 1,927.
Tags: Alkermes, ALKS, AMLN, Amylin Pharmaceuticals, option picks, option signals, options alerts, stock options trading
