Option Bulls Bet Valeant’s Monster Run Will Continue

Valeant Pharmaceuticals International has been an absolute monster stock for several months, and option traders are betting that the run will continue.

Bulls were going out in time yesterday, as more than 9,000 January 52.50 calls traded in a heavy buying pattern for $6 to $6.50, according to OptionMonster’s real-time systems. The open interest at the beginning of the session was just 13 contracts, so these were clearly new positions.

Valeant shares [VRX  48.23  ---  UNCH    ] closed yesterday up 1.13 percent to $48.45 as shares attempt to hold support at their 50-day moving average. The stock is up more than 50 percent since hitting a 52-week low of $32.05 on Oct. 4.

Earnings come out on Feb. 27 before the bell. For the calls bought yesterday to turn a profit, the stock would need gain roughly 21 percent by expiration in 11 months.

Overall option volume in the name was more than four times its daily average. Calls at all strikes outnumbered puts  by 32 to 1, a reflection of yesterday’s bullish sentiment.

By: David Russell