Pharmaceutical developer
Ironwood Pharmaceuticals (IRWD) is down 7 percent over the past year, but shares have been trending higher in recent weeks. One trader sees the potential for a big surge in shares in the coming months.
That’s based on the April 2024 $15 calls. With 112 days until expiration, 5,172 contracts traded compared to a prior open interest of 158, for a 33-fold rise in volume on the trade. The buyer of the calls paid $0.85 to make the bullish bet.
Ironwood recently traded for about $11.50, so shares would need to rise about $3.50, or about 30 percent in the next four months for the option to move in-the-money.
Such a move could be possible. The pharmaceutical space has been trending higher in recent weeks, and a number of sizeable merger announcements have been made.
Ironwood could be such a contender, as the gastrointestinal drug manufacturer has a market cap just under $2 billion.
Action to take: With an upward trend in place, shares look set to trend higher in the coming months. A merger offer could lead to a big jump higher quickly. That makes shares a speculative buy here.
For traders, the April calls are a speculation on pharmaceutical stocks being a big winner in the first quarter of 2024.
That appears to be the case for now, and a jump higher in shares could lead to high-double-digit returns or better for option traders.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.