Friday Options Update: ELN, BIIB, ANR, ORCL, MAR, A, IP, HBC, RKH

August 1, 2008

Rebecca Engmann Darst contributed to this report.

Elan (ELN) - “Weekus horribilis” for drugmaker Elan took hold today after its multiple-sclerosis drug Tysabri was implicated in new cases of a lethal brain infection. Coming hot on the heels of another product disappointment – underwhelming data on a much hoped-for Alzheimer’s drug in development – Elan Corp shares were stripped of 43.6% of their value $11.26. The collapse put paid to options traders who believed this week’s first selloff would find some support at the $20 level – earlier this week we observed a good number of traders selling $20 August puts in a bet that the first selloff of the week was overdone. The magnitude of today’s surprise is perhaps best articulated by its implied volatility reading, which spiked 111% to 123.3% - more than any other company today. More than 263,000 options have traded in the first half hour of the market, with a slight volume privilege to calls. As we observed earlier this week, traders are playing both sides of the selloff, with two-way traffic in excess of open interest in August calls at strikes 12.50-19 and in puts at strikes 10-15.

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