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This Drug Firm Will Snap Up 50% By Mid-2010: Trader

Shares of MannKind have seen some wild swings recently, and one institution-sized trader is making a big bet that the drug company will snap back up by 50 percent before mid-May.

OptionMonster's real-time tracking systemdetected a large block of 7,000 May 7.50 calls bought for $2.50 yesterday. The in-the-money calls dwarfed the average volume of 17 per day at the strike and were 19 times the open interest of 366 contracts, thereby reflecting newly opened positions.

MannKind rose 1.37 percent to $6.67 yesterday. For the May 7.50 calls to turn a profit, the stock would need to at least rise 50 percent to $10 or more before the options expire on May 14.

That may seem like a huge gamble at first blush, but shares of the biopharmaceutical company have been on a roller-coaster ride since Labor Day, soaring 67 percent to over $12 in the first three weeks of September but then plummeting to $5 less than a month later. Not surprisingly, implied volatility spiked to 274 percent by mid-October.

The company reported a narrower-than-expected loss i its third-quarter earnings report on Nov. 2. MannKind's next scheduled event is a presentation at the Lazard Capital Healthcare Conference on Nov. 17 along with other pharmaceutical firms such as Alkemes, which is also seeing bullish options activity.

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Options Trading School:

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MannKind Competes With:

Eli Lilly

GlaxoSmithKline

Novo Nordisk

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Mike Yamamoto is an analyst and writer for OptionMonster.

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