Mallinckrodt PLC (MNK) Bounces Back as CEO Defends Business

Mallinckrodt PLC (MNK) is bouncing back from Monday's brutal session

Nov 10, 2015 at 3:00 PM
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Mallinckrodt PLC (NYSE:MNK) is fighting back from yesterday's dismal performance -- caused by Citron Research's fraud accusations -- last seen 7% higher at $62.07. Citron's Andrew Left continued to call out the drugmaker during an interview on CNBC today -- describing the company as a "poster child" for price gouging. However, a lack of specific charges, as well as MNK CEO Mark Trudeau's insistence that claims of price manipulation are "completely false," are proving a boon to the shares.

With the stock still on the short-sale restricted list, intraday option volume has rocketed to nine times the norm. The largest single trade centered on a block of 1,273 January 2016 70-strike calls, which was possibly bought to open. If this is the case, the speculator is expressing confidence that MNK will bounce back above the $70 level by January expiration. Delta on the out-of-the-money option is 0.42, or 42%, but even if the option expires south of the strike, the most the apparent buyer will forfeit is the initial premium paid.

Taking a step back, option traders have been buying to open puts over calls in recent weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Specifically, Mallinckrodt PLC's (NYSE:MNK) 10-day put/call volume ratio of 1.52 registers above 63% of all comparable readings taken in the prior year.


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