Mylan bull bets on clear sailing ahead
David Russell | [email protected]
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.