2 Ways to Play Puts on MannKind Corporation (MNKD)

MannKind Corporation (NASDAQ:MNKD) is following its sector peers south today, off 5% at $4.56, despite news the company will release a new dosage of AFREZZA, following approval from the Food and Drug Administration (FDA). Meanwhile, in the equity's options pits, puts are crossing the tape at almost four times what's typically seen at this point in the day, although not all of the activity is of the traditional bearish variety.

Drilling down, "vanilla" option traders are apparently initiating new long positions at MNKD's August 4 put. By buying to open the puts, speculators expect MNKD to breach the $4 mark by the close on Friday, Aug. 21 -- when the series expires. MNKD has not traded south of the strike since March 2014, and the options market isn't too confident the stock will close below this level at August options expiration. Specifically, delta on the put is docked at negative 0.30, suggesting a slim 30% chance of an in-the-money finish.

Meanwhile, the equity's August 3 put has received the most attention in MNKD's options pits today. However, it appears the bulk of this activity is of the sell-to-open kind, as traders set a floor for the security through the close on Friday, Aug. 21. Should MNKD maintain a footing atop the strike over the next four months, the puts will expire worthless, and the speculators can pocket the initial credit received as their full potential profit.

According to MannKind Corporation's (NASDAQ:MNKD) Schaeffer's put/call open interest ratio (SOIR) of 0.82, which ranks in the 80th annual percentile, short-term speculators are move put-heavy than usual toward the stock. However, this metric measures both buy- and sell-to-open activity, and per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have sold to open 2.31 puts for each one they've purchased in the past 10 days.