From a Seeking Alpha article on Options Trades posted yesterday.
MannKind Corp. (MNKD) – Bearish option traders populated biopharmaceutical company, MannKind Corp., today with shares of the firm up a slight 0.10% to $9.32. Investors threw in the towel on out-of-the-money calls in the February contract and initiated pessimistic trades using in-the-money calls. Approximately 3,600 calls were sold at the February 12.5 strike for one dollar per contract. Open interest at that strike of 6,381 contracts suggests the sale of the calls is likely the work of traders abandoning previously established bullish positions on MNKD. Meanwhile, investors expecting shares of the biotech company to move substantially lower by expiration in February, sold roughly 7,000 in-the-money calls at the February 7.5 strike for an average premium of 1.97 apiece. Option implied volatility on the stock fell 26% during the first half of the session, from an intraday high of 125.94%, to the current reading of 99.90%.
MY Take The downward price movement has little to do with the intrinsic value we ascribe to MNKD and everything to do with whether options traders perceive an opportunity to profit from continued upward movement, downward movement, or sideways movement in the pps. Remember, MNKD was selling at $11+ in Sept. when it took a big hit as a result of the secondary stock offering. Most people believed it was oversold, and it's been slowly climbing back from $5+ where it settled after the momentum players bailed out. Much of the gap has been filled in during the past 120 days, but now the same momentum players are again showing a lack of confidence that it can sustain its upward path. This lack of confidence is reflected in the put and call activity. From the author's observation, a lot of folks are betting that the price of MNKD at the end of Feb. will be less than $7.50. And the call contracts they sold recently, which were in the money at the time, will expire without having been exercised, allowing them to pocket the premium and still retain their MNKD shares. People who bought those in-the-money calls, thinking that they got a bargain, and planning to sell them later upon continued upward price movement or to exercise them, will find themselves out of pocket for the purchase premium. MNKD is not the only biotech which is being played this way. Until it has a balance sheet that is based on hard numbers, the pps will continue to be whipsawed by smart market players. I'm dealing with the same problem with several other biotechs I own.