Options Trading News

August 27, 2013  Tue 9:47 AM CT

One investor wants to give Valeant Pharmaceuticals more room to run.

optionMONSTER's tracking programs detected the purchase of 1,173 January 110 calls for $4.60 and the sale of an equal number of Janaury 120 calls for $2.10. Volume was below open interest in the 110s, indicating that an existing short position was closed and rolled to the higher strike.

The investor probably owns shares in the Canadian drug maker and has been selling upside contracts as part of a covered-call strategy. In the process, he or she collects income and reduces volatility. (See our Education section)

Today's transaction cost $2.50, but raised their potential exit price by $10. See our Education Section for more on how options can be used to manage positions more effectively.

VRX is down 2.07 percent to $97.54 in morning trading but is up 63 percent so far this year. Earnings have beaten estimates for at least four straight quarters as the company successfully digests several major acquisitions.

Total option volume is twice the daily average so far in the session, with calls outnumbering puts by 46 to 1.
Share this article with your friends



The fastest money in the market
View full report »

Premium Services

Education & Strategy

Continue to melt up? Think debit call spreads

The U.S. equities market is continuing to melt up. Even though the labor market is stagnant, the Fed keeps hinting that a short term interest rate hike is coming sometime soon.

View more education articles »