Allergan attracts bearish position

By David Russell,

Shutterstock photo

Allergan attempted to rally against a short-term downtrend, prompting one trader to bet against the stock Friday.

optionMONSTER's tracking systems detected the sale of 2,100 May 65 calls for $0.85 and the purchase of an equal number of May 70 calls for $0.15, producing a credit of $0.70. Volume was more than twice open interest in both strikes.

AGN Chart AGN rose 2.76 percent to $63.69 on Friday after reporting better-than-expected sales and earnings and forecasting slightly bullish results for the next quarter. The maker of Botox has been drifting lower since hitting a two-year high at the end of March, and it entered the session down about 5 percent for the month.

The so-called bearish call spread is designed to profit from the downward momentum, letting the investor keep the credit if AGN remains below $65 through expiration. He or she then bought the upside calls to limit their maximum potential loss at $5 if the stock moves against them.

The trade appeared after the shares pulled back from over $64, confirming a resistance line between the April 1 and April 20 peaks.

The transaction pushed overall options volume in AGN to eight times greater than average.

(Chart courtesy of tradeMONSTER)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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This article appears in: Investing Options
Referenced Stocks: AGN

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