Pullback brings bulls back to Endo

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Endo International has had a huge pullback, and the bulls are piling in.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 3,000 January 60 calls for $8 yesterday, plus the sale of 3,000 contracts each in the January 45 puts for $3.30 and the January 70 calls for $4.20. Volume surpassed open interest in all three strikes, indicating that new positions were initiated.

The strategy cost just $0.50 to implement and will inflate to $10 if the drug maker closes at $70 or higher on expiration early next year. Selling the puts reduces the cost of the overall position but could also force the investor to buy shares for $45 if they fall below that level. (See our Education section for more on the strategy, which combines a vertical spread with short puts .)

ENDP rose 2.52 percent to $57.70 yesterday. It peaked above $80 in February, only to skid lower as investors dumped pharmaceutical companies. The stock is now attempting to hold support at its 200-day moving average and the same level where it gapped higher after a strong earnings report in November.

The next quarterly release comes out May 1 before the opening bell.

Total option volume was 7 times greater than average in the session, according to the Heat Seeker.




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.


This article appears in: Investing , Options

Referenced Stocks: ENDP

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