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ImClone Put Options Trade Heavily

http://online.wsj.com/article/SB115085128693085861.html

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By MOHAMMED HADI
June 21, 2006

Option traders bid up volatility expectations for ImClone Systems Inc., amid a decline in the drug developer's stock.

As ImClone shares fell $1.81, or 4.4%, to $38.95, the focus of activity was in puts. More than 19,000 of these changed hands, compared with just over 12,000 calls and, amid the heavy trading, implied volatility in these options ticked higher to 41% from 37%, according to Track Data.

Traders took a longer-term view on these options, with the heaviest trading taking place in puts that expire in November. More than 6,000 of the November 40 puts, for example, changed hands, compared with 4,380 previously outstanding.

There was also heavy trading in the November 30 puts. Given how far the stock has to fall for these to profit, though, it is likely that investors were selling them to help pay for the more expensive November 40 contracts -- or just to pocket the 80 cents they were fetching with the hope that the stock won't drop past that level.

There are some reasons for investors to expect volatility in ImClone shares, noted Goldman Sachs research analysts in a recent note. They have an outperform rating on the shares for long-term investors. One of them is that Amgen Inc. is hoping to get approval for its anticolorectal cancer drug panitumumab before year end.
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