Humanigen Inc (HGENQ)

[Corundum]

Just to clarify. There was a trade yesterday for 150,000 shares and equivalent May $30 calls and puts. There is a trade today for 200,000 shares and equivalent June $30 calls and puts. In addition, there is a trade today for 2,000 more May $30 call contracts.

For both trades, I think the strategy is to buy the shares and sell the puts, and then buy the calls as insurance against the stock price rising above $30 and driving the puts sold "negative".

For the May trade, I was guessing that the trader was betting that the high between now and May expiration was going to be in the $20-$22 range. That way, he keeps most of the premium he grabbed when he sold the puts, and gets into HGEN cheap on a net cost basis. If the stock goes over $30, he loses his premium, and has the calls to protect him on the upside. Effectively buys into HGEN at current pricing. No harm, no foul.

For the June trade, where we may have an EUA, and the stock may be much higher, he is still covered by the same setup. But now we see an additional 2,000 May (not June) call contracts at $30. I'm guessing these were sold! These may have been added in as a sale to grab the premium as a partial offset to the overall deal. The trader is betting that it is unlikely we will go over $30 by May expiration, so he can keep the premium.

I like the way this guy/gal trades (these guys/gals if there is a copycat).