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
section for more on how options can be used to amplify even
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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.
Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.