MYL calls have been very popular lately
Mylan N.V. (NASDAQ:MYL) is doing well today, up 1.5% to trade at $40.97 after receiving an upgrade to "outperform" from "market perform" at Leerink. After starting 2018 off strong with an annual high of $47.82 on Jan. 23, the drug stock has struggled. If history is any guide, though, it could be time to bet on Mylan's next leg higher.
Specifically, the shares have pulled back within one standard deviation of their ascending 160-day moving average. According to Schaeffer's Senior Quantitative Analyst Rocky White, after the previous three times MYL stock pulled back to this moving average after spending a significant amount of time above it, it averaged a 21-day gain of 10.46%, and was higher all three times. A move of similar magnitude this time around would have the stock back above $45.
A rally in the coming months could send even more short sellers scrambling. Short interest has fallen by 24% since mid-January, but at MYL's average daily trading volume, it would take more than four days for the shorts to cover their bearish bets.
Options traders appear to be optimistic, judging by the stock's 10-day call/put volume ratio of 11.11 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This reading ranks in the 100th percentile of its annual range, indicating long calls have rarely been more popular in the past year, relative to puts.
Digging deeper, the weekly 4/13 42-strike call has seen the largest increase in open interest during this time frame. Data from the major options exchanges shows substantial buy-to-open activity back on Tuesday, so traders are hoping the stock jumps above $42 by tomorrow's close, when the options expire.