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As my colleague Karla Yeh pointed out over at ONN.tv earlier today, Biogen Idec (BIIB) saw some unusual options trading in the wake of its positive earnings surprise before the bell. BIIB gapped higher at the open, jumping almost 2% out of the gate. Less than a half hour into the trading day, large blocks of roughly 4,000 contracts each traded at four March strikes: the 45-strike put, the 50-strike put, the 55-strike call, and the 60-strike call. It appears as though this investor sold the March 50/55 strangle (the 50 put and the 55 call) and simultaneously purchased the March 45/60 strangle (the 45 put and the 60 call).
A short strangle is typically employed when the investor expects the underlying instrument to stay range-bound; a long strangle is used by traders who expect a sharp move in either direction. In this case, with one of each crossing the tape as part of one strategy, it can be referred to as an iron condor.
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