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Valeant bulls target new highs

By: optionMONSTER
Posted: 2/18/2014 12:40:00 PM
Referenced Stocks: VRX

Drug makers are ripping today, and the bulls are piling into Valeant Pharmaceuticals head of quarterly results next week.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 5,000 April 145 calls for $11.30 and the sale of an equal number of April 160 calls for $4.90. Volume surpassed open interest at each strike, indicating that new positions were initiated.

Known as a bullish call spread , the trade cost $6.40 and will generate profit of 134 percent if the stock closes at $160 or higher on expiration in mid-April. (See our Education section for more on the leveraging potential of options.)

VRX is surging 5.11 percent to $146.71 in afternoon trading and at one point in the session hit a new all-time high of $146.94. Shares are up 120 percent in the last year as management gobbles up other companies and introduces new products. The next earnings report is scheduled for before the opening bell next Thursday, Feb. 27.

Total option volume is more than quadruple the daily average so far in the session, according to the Heat Seeker. Calls outnumber puts by a bullish 14-to-1 ratio.