Options Trading News

December 13, 2012  Thu 12:20 PM CT

One investor apparently thinks that the sky's the limit for generic-drug maker Mylan.

optionMONSTER's Heat Seeker monitoring program detected the purchase of about 3,300 April
27 calls for $2.06 and the sale of an equal number of April 30 calls for $0.59, resulting in a cost of $1.47. Volume was below open interest at the lower strike, so there are two possible explanations for the trade.

One is that the investor owns shares and had previously sold the April 27s to earn income. The upside would have been capped at the strike price, so the trader rolled the position higher to the April 30s. That gave him or her the right to collect an additional $3 from the shares pushing higher.

Alternately, both legs of the trade could have been opened in a new bullish call spread. That strategy would leverage a move to $30, with potential profit of more than 100 percent. (See our Education section for more on how options can be used to amplify even modest fluctuations in underlying share prices.)

MYL rose 0.4 percent to $27.95 in afternoon trading. Shares are up 34 percent in the last six and are near their previous all-time high of $28.75 set in October 2003.

Based on today's option action, one trader is looking for a breakout of that level by sometime in the spring. The company has been riding a wave of strong quarterly reports and raised its guidance twice since June.

Some 7,600 contracts have traded so far in the session, almost quadruple the average amount. Not a single put has crossed our screeners all day.
Share this article with your friends

Related Stories


Mylan draws downside put position

September 29, 2015

The drug maker has lost about 40 percent in the last three months as the pharmaceutical sector has dropped hard after years of market leadership.


Bulls come back to Mylan, Teva

September 28, 2015

Health-care stocks have been under pressure recently, but traders are still bullish on these two pharmaceutical companies.

Invest Like a Monster - San Antonio: October 9-10


The fastest money in the market
View full report »

Premium Services

Archived Webinar

Education & Strategy

Options Academy: More on the Covered Call Strategy

Last week, we talked about the Covered Call and the misconceptions that surround it. We spoke about how an investor must realize that the Covered Call is actually a premium collection strategy and not so much a directional one. If an investor can grasp this idea, the investor stands to do a heck of a lot better in the strategy than they currently do.

View more education articles »