Another Case for Buying Options: Gilead’s Purchase of Pharmassett

Nov 21, 2011
J. Webster
Comments Off on Another Case for Buying Options: Gilead’s Purchase of Pharmassett

Here’s another case for why buying options is better use of your capital than stocks – there’s more bang for your buck as they say. Jon Najarian of CNBC’s Fast Money tweeted this gem about Gilead Sciences’ purchase of Pharmasset for close to $11 billion. If you owned the stock you got an 85% return. If you owned the options on the stock you were up 3,300% after today’s news. Wow!

Pharmassett has the stock ticker VRUS.

Update: Turns out some of these Pharmassett option buys might just be too good to be true. Meaning, these options buyers knew something about the deal going through beforehand.

On November 16, data from Web site optionMonster showed the purchase of 358 December $80 Pharmasset calls for $1.55 per contract for a total premium of $55,490, said optionMonster co-founder Jon Najarian. On that day, the stock closed at $71.77. Early on Monday, those calls cost $55 per contract, making the position worth about $1.9 million, he said.

“This is extremely fortunate timing. Given that the value of these options moved up more than 3,300 percent, I think this trade may merit closer inspection by the regulators,” Najarian said.

Full story is over at Reuters.

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