AVANIR Pharmaceuticals, Inc. (AVANIR) is a pharmaceutical company focused on developing and commercializing therapeutic products for the treatment of central nervous system disorders. AVNR is currently trading around $10.96 in a 52 week range of $2.62 – 11.38. The company’s stock has been outperforming the market this year with shares increasing 225.6% year to date.
On Friday, OptionHacker detected a large block of calls being bought in the Sept and Oct options for AVNR. Based on this unusual option activity, our trader’s established positions in both strikes at around $.50 and $1.50 per contract, respectively. News broke early monday morning that AVNR announced positive results from its phase II clinical trial of AVP-923, a promising treatment for agitation in patients with Alzheimer’s disease. The stock gapped up dramatically higher at the open, and reaching 52-week highs of $11.38 on above average volume. Our traders exited their positions at around $2.45 and $3.40, providing over a 500% combined return on the move. This is just another example of the early detection power of OptionHacker.
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We define unusual option activity as large block trades that represent a large percentage of daily option volume. The block trade is considered “unusual” if the option volume is above the average daily volume over the past 22 days. At KeeneOnTheMarket.com we scan and analyze order flow from all of the major options exchanges in order to identify any unusual option activity.
Analyzing unusual order flow gives traders a window into what the positions that large institutional players have. The majority of unusual option activity can be traced back to hedge funds, mutual funds, and other large institutions. Knowing where these institutions are placing their bets can be hugely advantageous for any trader. These institutions have informational and technological advantages that the average trader doesn’t have, and the amount of time and analysis that goes into every one of their trades is substantial. We offer this service through our 7 hour daily LIVE trading room http://bit.ly/135QWt8 or through Premium Twitter feed with all entries, exits, and unusual options activity tweeted all day long:http://bit.ly/11f0L9u.
Order flow can however at times be deceiving. One might logically thing that a large block buyer of calls is bullish on the underlying. This is not always the case. Remember that a large number of participants in the equity options market are hedgers. Long calls are a hedge against short stock, and long puts are a hedge against long stock. With this in mind we have developed a 7 step trading plan that helps filter out unusual option activity that will not provide actionable trade setups. It is by using this plan that we are able to identify the most significant unusual options activity trades every day.