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Bulls come back to Mylan, Teva

Health-care stocks have been under pressure, but the bulls still like Mylan and Teva Pharmaceutical.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 12,000 January 55 calls in MYL for $0.98 and the sale of an equal number of January 35 puts for $0.58. A similar trade followed in TEVA, with 5,500 March 70 calls bought for $1.05 and 5,500 March 50 puts sold for $1.09.

Both transactions are similar to winning bets placed in the drug makers earlier this year. The strategy is highly bullish, combining long calls with short puts to mimic holding the stocks. The upfront costs were negligible but the downside risk is considerable if shares move lower. (See our Education section)

MYL slid 4.28 percent to $43.61 on Friday and TEVA dropped 2.64 percent to $59.34. Both are down from all-time highs earlier in the year, some of which resulted from speculation of a merger between the two.

Friday's option trade, known as a bullish combination, programs buy orders at lower prices while the long calls ensure that the investor won't miss a rally. If the stocks remain in a range the positions will expire worthless.

Chart analysis probably played a role because the puts were sold at important support levels. MYL, for instance gapped higher and consolidated around $35 in the summer of 2013. TEVA churned around $50 both early last year and in May 2011.

Total option volume was 8 times greater than average in MYL and 6 times average amounts in TEVA, 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 Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


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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