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May 1, 2013  Wed 9:46 AM CT

AGN: SEE CHART GET CHAIN FIND STRATEGIES
Allergan is down today, and the bears are piling in.

optionMONSTER's Depth Charge monitoring program detected the purchase of almost 5,000 May 110 puts, most of which priced for $2.40, against open interest of 1,545 contracts. They also snapped up more than 2,600 May 110s for $0.55 to $0.80.

Puts lock in the price where investors can sell shares in the Botox maker, no matter how low they go. That gives them a strong inverse correlation to the stock price, so they make money to the downside. (See our Education section)

AGN is down 7.22 percent to $105.35 this morning but is up 18 percent so far this year. The drug maker broke out to new all-time highs in January and kept climbing through early last month, when it started drifting lower.

Today's drop comes after the company forecast second-quarter earnings of no more than $1.20 a share, below the $1.22 expected by analysts. Sales were forecast at $1.50 billion to $1.575 billion, which suggests that it will also miss the $1.57 billion estimate.

Total option volume is 28 times greater than average in AGN so far today, with puts accounting for more than two-thirds of the total.

Disclosure: I own AGN shares.
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